Highlights: • In the face of declining voice revenues resulting from competition, telecom service providers are seeking alternative revenue streams and are starting to direct capital spending toward emerging telecom services, particularly broadband and IPTV services.• While growth opportunities to serve broadband in developed markets such as the U.S. and Europe will likely be smaller than in the past, due to higher penetration rates and an economic slowdown, we still see expansion of the DSL market and investment into faster IP video-enabled services as a catalyst for companies like AT&T (T 39 *****) and Telefonica (TEF 100 ****). We believe broadband and video services, particularly bundled at a discount, will remain in demand. • Meanwhile, we think that the low penetration rates in emerging markets such as Latin America will allow these regions to experience broadband growth rates that surpass most developed countries. • We contend that communication equipment providers such as Corning (GLW 23 *****) and Netgear (NTGR 29 ******) have become the arms suppliers in the competitive telecom world. Despite high pricing pressure, we think they will largely emerge victorious in the triple-play war, as long as the battle for broadband continues.
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