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!

Telecom Consolidation in a Post-Snowden World



For instance, earlier this week, German magazine Der Spiegel disclosed that the NSA infiltrated servers in the Huawei headquarters in Shenzhen, under an operation code-named "Shotgiant," whose mission was to find any connections between the company and China's People's Liberation Army, which have been alleged but never proven.

While the operation could not uncover any such ties, it did obtain company information such as client lists, internal employee training manuals and other sensitive data. Irony aside (after all, the NSA carried out the very activity some U.S. politicians and lobbyists claimed that the Chinese military did via Huawei), another mystery is: If the espionage determined that Huawei is, in fact, independent, without any unusual ties to its home country's government, then how come this knowledge was not publicly disseminated?

Operation Shotgiant's leak came just a few days before Chinese President Xi Jinping's European trip, where he held talks with leaders including German Chancellor Angela Merkel, who was also a target of NSA electronic surveillance.

Thus, the NSA scandal fallout will no doubt be a topic very much in play throughout 2014, including how the ripple effects will be felt by various vendors.

Some vendors such as Cisco have alluded to a bit of an aversion to U.S. companies in certain regions such as Asia/Pacific, but it remains to be seen if this will span out more than just one or two quarters. There were rumors flowing at the Mobile World Congress that this effect will be felt not just in "public cloud" government-led initiatives but also telecom infrastructure buildout projects.

In fact, there was speculation that preferences for new European infrastructure deals would be in the future given to an European vendor (e.g. Ericsson or NSN) and an Asian vendor (e.g. Huawei or ZTE), at the expense of U.S. vendors such as Cisco, Hewlett-Packard (HP), IBM (IBM) or Juniper.

A more important question is whether or not that could also mean the consolidation trend would come to a halt, or even worse, go the other way. More specifically, in a post-NSA scandal world in which countries are increasingly suspicious of other countries or foreign vendor activities, will we start seeing the balkanization of some companies become a reality?

Many operators and governments would prefer enlisting the help of vendors that are local or as close-to-home as possible instead of having to rely on foreign players or joint ventures with foreign player participants, particularly whenever national security interests are paramount.

Under such a scenario, new sub-scale carrier-focused vendors will struggle to reach a better operating leverage in their models, unless service provider capital expenditures remain robust for many years to come.

Such a fragmentation is not going to be a good outcome for the industry, so I hope  governments and operators alike will recognize the need of a local relationship should not be allowed to trump market forces. They will need to start trusting more their vendors independently of their nationality.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Ronald Gruia is a Director at Frost & Sullivan covering emerging telecoms. He has spoken at conferences including Supercomm, CTIA, Intel Communications Summit and VON Canada.
2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
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 16,957.36 -126.44 -0.74%
S&P 500 1,978.58 -9.40 -0.47%
NASDAQ 4,448.8290 -23.2790 -0.52%

Brokerage Partners

Rates from Bankrate.com

  • 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