When trading resumes, wireless investors will be asking how well mobile-telecom sector stocks, lately besieged by warnings, can carry the burden of economic uncertainty after the terrorist attacks on American soil.

The biggest potential impact of Tuesday's events on the long-term financial well-being of the wireless sector is a disruption of the recovery in U.S. equipment spending. During 2001 Europe has continued to sink into a spending decline, followed by economically ailing Latin America and even some recent speculation that the Asian market, particularly in China, could be slowing spending.

"The U.S. market is the only market starting to see stability and stable demand. Not accelerating demand, but stable demand," says Wojtek Uzdelewicz of Bear Stearns, which has done banking for Motorola ( MOT). But he adds that the U.S. market isn't the clincher for a wireless recovery. "Europe is the most important market. Handsets there took a downturn much earlier, last year at this time. Now the inventory issues have been worked though, but there's been no pickup in demand." Uzdelewicz expects slightly lower handset shipments from the second quarter to the third and a much weaker infrastructure market.

September has been a culmination of hard times for the wireless infrastructure and mobile-phone markets, following a steady stream of troubling news in the past two weeks. Kicking off a week of warnings on Sept. 4, Ericsson ( ERICY) cautioned that it would not see growth in its mobile systems business in the third or fourth quarters, a pessimism it extended through the whole of 2002. Motorola followed with a second-quarter revenue warning on Sept. 6.

Nokia ( NOK) echoed the gloomy din Sept. 11 with the news that it would not achieve expected flat-to-5% revenue growth from the third quarter of 2001 to the third quarter of 2002. Instead, Nokia plans to maintain "mid-teens" operating margins good for the 12-cent to 13-cent anticipated third-quarter profit. Nokia posted earnings of 15 cents a share in the second quarter of 2001.

China Unicom's quarterly results this week helped shed light on the reasons for the equipment provider's lagging performance. The Chinese network operator lifted spirits earlier in the year when it formalized CDMA-technology based equipment buys. This week it did the opposite by cutting its capital spending budget, slated for $4.39 billion in 2001, by 10% to 15% through the rest of the year. Carriers across the world have threatened the same.

What Will the Consumer Do?

Weighing heavily in the debate is the chance that consumer spending will retreat under the threat of a national crisis. In the two-pronged wireless equipment business, such a reaction would have minimal short-term impact on the base station equipment business pitched to large wireless carrier customers. Even if U.S. consumers swore off buying the mobile phones they'd been planning to buy, the global market for handsets is by no means dominated by U.S. spenders. A prolonged purchasing slowdown could cause carriers to cut back on network expansion in 2002, but that would take more than a short-term decline.

But the most pressing concern is the months-old delay of the data services accompanying the anticipated rollout of general packet radio service (GPRS), a half-step between current GSM and third-generation wireless networks. Consumers' willingness to pay for speedier email and short-messaging services on their mobile phones still remains to be proven. GPRS's popularity will go a long way toward reassuring the investment community that the money needed to build third-generation networks will be well spent. Nokia expects to deliver GPRS phones shortly, but its industry-wide projection for GPRS sales in 2001 is 10 million phones, a sliver of the 405-million phone shipment estimates made at the end of the second quarter.

For those concerned about U.S. wireless carriers, both Nextel ( NXTL) and Sprint PCS ( FON) enjoyed positive data points last week indicating strong subscriber numbers, with less than a month to go in the quarter. Verizon ( VZ), Sprint and AT&T Wireless ( AWE) operate wireless networks in New York City, but the Yankee Group's Roger Entner estimates destroyed equipment from the collapse of the World Trade Center buildings at $7.5 million. He believes those sites could be quickly restored, and added that in Manhattan there are cell sites every two to three blocks, compared to a nationwide average of every 2.5 miles.

In London trading Wednesday, Nokia held up well, rising 1%, while Motorola and Ericsson fell less than 2%. Investors have expressed their displeasure with the lack of a mobile-equipment rebound sternly in the past few months. Nokia has fallen from $27 to $13.75, or 50%, since its last sign of strength, when it reported first-quarter results. Despite maintaining its 35% share of the handset market, Nokia has dipped 37% since the beginning of August.

Motorola staged a second-quarter mobile-phone unit rebound, inspiring investors for a small rally. Despite a 3% gain in handset market share to 17% in the second quarter, the company's stock has fallen 21% since Aug. 1 to $15.04. Ericsson's board has finalized the plan to spin off the money-draining mobile-phone business into a joint venture with Sony in October, but nonetheless Ericsson is hovering around 52-week lows after a 27% slide since the beginning of August.