This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Cingular Presses the Pain

Updated from 3:27 p.m. EDT

Cingular's plan to slash spending confirms an unwelcome trend for suppliers.

The integration of AT&T Wireless' network is nearly done, and with its 90-city expansion goal for 3G service called universal mobile telecommunications systems, or UMTS, in sight, Cingular is expected to cut spending by $1.5 billion, or 20%, next year, say Lehman Brothers' analysts in a note Thursday.

By Lehman's estimates, Cingular's 20% cut would represent about 5% of total wireless spending in the U.S. next year.

Cingular is jointly owned by AT&T (T) and BellSouth (BLS). And for the telco's investors, the idea of a cost clampdown means better cash flow and higher earnings.

But for shareowners of wireless infrastructure outfits such as Powerwave (PWAV), Ericsson (ERICY) and Lucent (LU), the news that a big customer will spend less next year fits an all-too-familiar pattern.

"This isn't really a surprise," says one hedge fund manager. "We saw what happened to Powerwave in the first quarter after Cingular made its cuts." In April, Powerwave warned of a 20% sales shortfall due to order cancellations by Cingular.

Powerwave is already down nearly 50% from March, when it hit its high for the year. "I'm pretty sure the price reflects what's going on, but this brings visibility into 2007 a lot closer," says the hedge fund manager.

A Cingular representative said next year's budget hasn't been released so he couldn't comment on the Lehman report. Cingular has about 18 cities and surrounding suburbs covered by the UMTS network. The goal is to have nearly 100 communities blanketed with the faster wireless data service by year end. Though not yet officially announced, Cingular turned on the UMTS service in New York on June 21.

Cingular is running a distant third place in a three-way wireless broadband race with Verizon Wireless, which is co-owned by Verizon (VZ) and Vodafone (VOD), and Sprint (S). Cingular's UMTS, like Verizon and Sprint's evolution data-only, or EV-DO, technology, is designed to offer users mobile Internet connections at relatively fast speeds. But the service is expensive, around $80 a month, and aimed primarily at laptop-carrying business customers.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs