No surprises in 2005: Morgan Stanley

Lucas van Grinsven

AMSTERDAM: Technology, media and telecoms chiefs are expected to be cautious about 2005 when they gather in Barcelona this week at Morgan Stanley's annual TMT investor conference.

Their stance will be similar to that expressed a year ago, even though 2004 brought mobile phone unit growth of more than 25 percent, strong business for wireless networks producers and a robust wireline telecoms equipment market.

It is unlikely, however, that 2005 will bring the same surprise because record oil prices have dented consumer confidence, companies remain wary about increasing spending on technology and telecoms operators will restrain their investments after a year of catching up on long overdue repairs.

"I expect a slowdown. And I expect this time we won't be wrong. Overall, it's going to be a dull and challenging year," said Morgan Stanley technology analyst, Angela Dean.

Chastened by the 100 billion euro ($130 billion) bill for third generation mobile broadband licenses and billions more for acquisitions in the late 1990s and 2000, Europe's telecoms companies have started drawing a line under their past by reintroducing dividends while keeping a curb on costs.

Telecoms operators will start to benefit from more efficient broadband technology which can handle more traffic at less cost and is easier to manage, Dean said. This allows them to spend less of their cash on networks, and more on shareholder payouts.

Communications equipment leaders like Nokia, Ericsson and Alcatel and leading operators Vodafone, Telefonica and France Telecom are sending their CEOs or finance chiefs to the conference.

COMPUTER SERVICES SLOWDOWN

The IT services sector, represented by Atos Orgin and Cap Gemini, may be the exception, experiencing another year of revenue slowdown and hoping that 2005 will at last bring the long-awaited turnaround.

Consumer electronics makers such as Philips have started to feel the effects of weaker consumer confidence despite a plethora of popular new devices such as flat TVs, portable music players, and DVD and hard disk recorders.

In advertising, revenue growth increased in virtually all media in 2004 through much of Europe, with strength in Italian television, radio and newspapers. Rare exceptions such as the UK and French radio sectors were sluggish.

But many companies have become more cautious about the end of the year and into 2005, with hazy global economic prospects and geopolitical concerns restraining optimism.

Vivendi, BSkyB, VNU, WPP and Publicis will be some of the media companies present.

With revenue growth under pressure, investors are keen to hear how companies can boost sales.

Nokia's 10 billion euro cash pile will once again be a topic of discussion, and Dean said Nokia might be asked why it did not buy Canadian wireless corporate e-mail company Research In Motion a few years ago, when it was still affordable.

The conference starts on Thursday and will draw a crowd of 500 fund managers from 18 different countries. Reuters will report from the conference, honouring a daily embargo on all copy, which expires at 1700 GMT.

(Additional reporting by Kirstin Ridley and Jeffrey Goldfarb in London)