Gartner says bankruptcy "graduates" will Shape North American Carrier Market Anew

Fiber Optics Weekly Update, May 2, 2003

Carriers emerging from bankruptcy with lower costs will play an important role in a North American public services market that still has too many carriers for the demand, according to Gartner. Gartner analysts said many of these carriers that are coming out of bankruptcy will stimulate renewed price competition, and in some cases, descend into second bankruptcies.

"Many of these Chapter 11 'graduates' will be consolidated or liquidated, at least a fourth will re-enter bankruptcy (more likely Chapter 7 than 11) within the next three years, and a maximum of a third of them will still exist in their current form at that point," said Steve Koppman, principal analyst for Gartner's Network Services research group. "No strong recovery with a large enough increase in end-user spending to support the current level of players is likely in the next three years." A reduction in the current number of companies is inevitable with RBOCs assuming a consolidating role by the end of 2004, and at least one player likely emerging from the second tier to make a major impact as a consolidator.

"The market status quo now appears unsustainable, with more separate players and networks than can be profitable," said Koppman. "Consolidation has to come for the industry to prosper under changed economic circumstances. Though it is a hard time for carriers to get financial support for consolidation, at the same time acquirers should note that valuations of potential acquisitions are unlikely to get much lower."

Additional information is available in the Gartner Perspective, "Bankruptcy 'Class of 11' to Shape North American Market Anew." This report provides detailed analysis, profiles and financial information on carriers emerging from bankruptcy and their influence on the larger public services market.

This information is produced by Gartner's Global Communications Research group. This group is responsible for analyzing the markets and technologies for fixed-network services and advising enterprises and vendors on a broad range of communications issues. More information on the telecommunications industry is available on Gartner's Web site at http://www.gartner.com/1_researchanalysis/focus/telecom_fa.html.