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| The world's largest companies - May 2002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Telecoms By Fiona Harvey Published: May 8 2002 12:27GMT | Last Updated: May 9 2002 14:38GMT |
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 The big surprise for the telecoms industry in this year’s Global 500 is that it has kept its place as the third biggest sector in the list. After the battering taken by telecoms companies in the past year, investors might have expected the sector to plunge down the rankings. Telecoms has kept its place, however, only because so few others approach its enormous size. The market capitalisation of telecommunications services companies in last year’s rankings was $2,289bn; this year, the figure was $1,455bn, a fall of 37 per cent. The reasons for the waning of the telecoms star have been well-rehearsed: the unrealistic expectations of investors during the dotcom frenzy; the high prices paid for third-generation mobile-phone licences; over-investment in infrastructure, leading to a glut of fibre-optic cable capacity and the increase in competition that has led to lower margins in the mature fixed-line communications business. As a result, telecoms companies that over-extended themselves during the internet boom have been struggling to refinance their debts. Plans for the disposal of assets and the winding up of unprofitable ventures characterised the early part of the year as companies looked for easy ways to improve their balance sheets. Job-cutting programmes gathered pace. The write-down of assets bought at inflated prices dealt further blows to investor confidence. The question now is whether we have seen the worst in the slimmed-down telecoms sector. But the outlook for 2002 remains bleak. Vodafone, the industry’s second biggest company, has already lost 40 per cent of its value since the start of the year. Unless it can recover that ground, it will lead the market downwards. Other big companies are also weak. WorldCom, once an audacious predator, is casting around for a buyer, only to find none. Verizon Communications, the biggest US telecoms carrier, predicts growth this year of less than 1 per cent. Robin Bosworth, director of Schema, a consultancy, warns: “There will have to be consolidation.”
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