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    Concerns about the cable lay market

    News // July 13, 2001
    Representatives of the undersea cable market gathering at KMI Corporation's 7th Annual Fibre Optic Submarine Systems Symposium in Dublin, Ireland in June heard the current economic turndown described as a "normal cyclical storm", but were warned that noteveryone in the industry will ride it out.

    "We're in a dip, but [the market] will come back," said William Carter,executive advisor at Global Crossing Development Company. Mr Carter and otherspeakers helped put in context the current acute financial challenges thatfibre-based submarine telecom service providers and suppliers are facing.

    Riding out the storm will not be easy. "The good news is there will besome survivors," quipped Ed McCormack, chief operating officer at FLAGTelecom, based in London. For companies that can "hold their nerve," he said,the current market conditions may prove a long-term positive factor. Althoughin the short term he expects capital expenditures to decline relative torevenue, "we'll get a more rational marketplace as a result."

    Conference co-chair J Robert Cooper III presented statistical evidence ofthe cyclic nature of the submarine telecom market. "There has been a slowdownin investment in undersea systems every three or four years since 1988, suchas spending decreases of 42 per cent between 1989-1990 and 36 per cent between 1997-1998. Looking forward, there will be a 12 per cent decrease between 2001 and 2002," Cooper said.

    Some brokers, such as Offshore Shipbrokers in Aberdeen have already expressed concerns about the effect that a slowdown could have on the booming cable ship market, particularly the large number of shipowners who have embarked on speculative builds in the last couple of years.

    The problem seems to be that the demand for cable bandwidth is not at the level expected, which is itself a reflection of the general market sentiment for technology and telecom stocks.

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