Wireless Telephone Providers

From time to time, we see problems not only with specific companies, but with entire industries. In September 2000, we warned our clients about expectations in the wireless sector. We examined Wall Street’s story, and the numbers just didn’t add up. Penetration rates were predicted to reach nearly 100% by 2006, yet Wall Street’s expectations of churn rates were significantly lower than IDC predictions, and their projections did not adequately account for technology upgrades. Analysts on the Street also seemed to overestimate worldwide demand. Expectations were for two billion wireless subscribers by 2005, representing approximately 1/3 of the world’s population. The economic picture just didn’t support these expectations. The World Bank estimated that 2.8 billion people were living on $2 per day. Only 900 million people lived in countries that the world bank considered to have high incomes. At the time the report was written, the entire continent of Africa had only 14 million phone lines—fewer than Manhattan.

Current Example: Apple Computer (AAPL)