June 10, 2002 Senior Telecom Execs See Industry Upturn Early in 2003, Continued Shakeout in Near Term, International Study Finds

Fifty senior executives representing 39 of the worlds leading telecommunications service providers predict further downward adjustment and consolidation in the industry this year, but also warn companies to be prepared for an upswing-most likely early in 2003. The executives discussed their capital expenditure plans for the next year or more and offered personal and company perspectives on the industry in recent personal interviews with senior researchers at Telecommunications & Technologies International, Inc. (TTI), Chevy Chase, MD.

June 10, 2002

In a just-released study, World Network Equipment Industry Recovery 2002-2003," telecom service providers interviewed will spend less on network equipment this year than last, in line with current cost-cutting efforts, TTIs study shows. Internationally, capital expenditure budgets for 2002 are down 11.07% from 2001 for the 29 companies that provided figures for those years. In North America alone, budgets are down 7.65% this year from last. Some companies plan further cuts next year, but capex budgets overall will level off or even increase slightly in 2003, based on 21 companies budget projections, an increase of slightly less than 2% over 2002.

Companies in the Americas, Asia and Europe participated in the study. Among them: 360networks, AT&T, Bell Canada Enterprises, BellSouth, BT Group, China Mobile, China Unicom, Cingular Wireless, CSC, Deutsche Telekom, Embratel, FOCAL Communications, Hughes Network Systems, Inmarsat, Intelsat, ITXC, Level 3, mmO2, NTT, PCCW Hong Kong, Rogers Communications, SES Americom, Singapore Telecom, Sprint PCS, Telecom Argentina, and Telefonica.

For many companies-service providers, equipment manufacturers, suppliers and software developers alike-the difficult adjustments of the past two years are by no means completed and an important and difficult transition period lies ahead, the study shows.

Emerging from the executive interviews is a portrait of a far-flung industry that is resizing and redefining itself so that it better corresponds to customer requirements and the realities of the marketplace. Among the major developments revealed is the accelerating pace with which three familiar sleeper" technologies-IP-based voice and data networks; broadband; and third-generation (3G) wireless-are being deployed, quietly revolutionizing telecommunications services and the telecom industry everywhere.

The study also highlights the critical role of government in the revitalization of the telecom industry in the U.S. and abroad. When executives were asked to assess factors that could directly affect their capital expenditure budgets over the next two years, more of them pointed to regulatory change than to any other single factor.

Despite their forecast for a difficult 2002, executives interviewed in the study show a uniformly upbeat attitude. As John Barnicle, President and COO of FOCAL Communications, notes, The companies that have worked through the problems of the past couple of years and uncertainties that still lie ahead are likely to be stronger and better prepared for the future."

This report puts the future in perspective," says Thomas E. Wheeler, President & CEO of the Cellular Telecommunications & Internet Association (CTIA). Observes David Broecker, Marketing Vice President at NEC America, Inc.: "The data and observations on applications and drivers are very helpful in thinking about future product directions."

In addition to executives, TTI researchers interviewed a number of experienced industry observers, and government regulatory and policy officials in the U.S. and abroad, for a total of more than 60 individuals in all.

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For further information on the study, or to order a copy of the report, please contact TTI, below. Press: For an Executive Summary or to interview principal researchers, please contact Richard Thayer, as indicated below.

Telecommunications & Technologies International, Inc. (TTI), based in Chevy Chase, MD, offers market intelligence, professional consulting and public policy expertise, specializing in telecommunications and advanced information technologies. Contacts: Richard Thayer, Ph.D.: 301.913.2883. Email: rt@ttinetwork.com. www.ttinetwork.com