Merrill Lynch Releases Telecommunications Report

Merrill Lynch released a report today entitled, Telecommunications: US Telecom 2Q05 Preview.

 Among the findings released today, Merrill Lynch offers a series of expectations for the second quarter. Quoting directly from the report:

• The seasonal trends in telecom for the second quarter period favor wireless over wireline, even more so than for other periods, due in part to demographic drivers. We expect this to be the case in 2Q 05.
• We think that Verizon Wireless will gain share during 2Q 05, in another solid quarter of wireless results. We visited over 80 stores in four US markets in May and June. We believe that second quarter wireless highlights will include: (1) Verizon Wireless taking share, (2) Cingular slowing, but still solid, and (3) the remaining three national operators tracking steadily. We are looking for wireless margin expansion in 2Q 05, after somewhat of a disappointing first quarter in this regard.
• We estimate that 2Q 05 will be seasonally weak for access line losses and DSL additions. We believe that substitution by wireless and demographic trends will continue to drive line losses. Cable (VoIP) telephony appears to be taking between 1% and 2% share per quarter where available, depending on price. However, most cable operators have held pricing firm to date.
• Based on Merrill Lynch telco and cable estimates, we believe that DSL flowshare will remain above 50% for the telcos, due to continued aggressive pricing and an effort to hold share.