WiMAX and the credit crunch

There’s no good time to have an economic downturn, but the unprecedented credit squeeze on the global money markets looks particularly bad news for such a capital-intensive business as telecoms.

And with mobile WiMAX networks starting to roll out in the US, Russia, India and Asia – and auctions for broadband wireless access licences coming up in key Latin America growth markets – it would appear to be the worst of all possible times to have a global credit crunch as far as the WiMAX community is concerned.

It is reasonable to assume that some WiMAX network rollouts will now be delayed due to more difficult (and more expensive) access to capital, and that governments will be tempted to push back spectrum auctions even further until the economic climate brightens.

How far the present economic turmoil will adversely impact the WIMAX industry, and other telecom sectors, is of course unknown (in much the same way as it is still unknown how much taxpayers’ cash and additional regulatory measures will be required to restore confidence in a battered and bruised banking system.)

Yet there are factors that give mobile WiMAX more than a fighting chance of riding this economic storm (or at least minimising the damage). One of those is having a pretty well-developed eco-system already in place, comprising multiple WiMAX chipset vendors that prefer (so far) to grow the market by not making patent royalty claims and so keep overall costs down.

Barry West, Xohm chief, says it is reasonable to expect WiMAX chipsets to come down in the short- to medium-term from the current $20-25 range to $17-20. This makes the possibility of offering unsubsidised WiMAX-enabled devices at still attractive prices, which helps the operator business case.

Of course, the decline in chipset cost is dependent on volume increases, which comes down to demand. In the US, where the economy looks especially vulnerable, stimulating that demand looks a daunting and capital-intensive challenge. The good news for the WiMAX community in general, and the proposed new Clearwire joint venture in particular, is that two cash-rich investors – Intel and Google – are ready to provide substantial investment to kick-start the market.

For its fiscal Q3 2008, Intel still managed to post an impressive net income of just over $2bn (a year-on-year rise of 12 percent) on revenue of $10.22bn (only slightly lower than analyst forecasts of $10.,26bn). This suggests, of course, that the full effects of the economic crisis on IT corporate spending has yet to feed through to suppliers. Intel is taking the unusual (and slightly ominous) step of updating investors on 4Q 2008 performance, ahead of posting its results, on 4th December. Maybe then we’ll have a better idea of the scale of the fallout from the economic chaos that is confronting the ICT sector.

I have heard it argued, however, that WiMAX will enjoy some immunity from the credit crunch by virtue of making its initial push in emerging markets, where local banks have been less exposed to the reckless and high-risk behaviour of their counterparts in developed economies. And in Japan, another key mobile WiMAX market, the banking system – it has been argued – has become more prudent and robust after a long economic downturn during the 1990s.

I don’t know how far these arguments hold water (and I suspect those who make them don’t know either), but the WIMAX community does at least have deep-pocketed friends. That could well prove to be the technology’s most effective buffer against the credit crunch.


  1. Avatar Martyn Roetter 24/10/2008 @ 3:29 pm

    There are two issues implied in this review: (a) what will be the impact of the credit crunch on telecom overall and mobile broadband in particular, and (b) how will this impact affect the competition between WiMax, HSPA and others? This review does not address (b), yet it is likely that whatever negative impact may result from (a) will be more significant for WiMax than for HSPA, because the latter is already much more widely deployed, and has equally powerful, and some of the same as well as other supporters behind it (e.g. T-Mobile’s launch of the first Google-inspired Android-based handset in the U.S.)

  2. Avatar Alex Alavi 24/10/2008 @ 6:19 pm


    As always, thank you for good and timely article. In my judgment, there is an opportunity for the mobile WiMAX industry and operators to achieve rapid market penetration in a downturn economy when consumers are looking to save money. The WiMAX industry would need to offer better services at lower prices to accelerate growth in competitive markets since the incumbent operators cannot afford to match the lower prices due to their large subscriber base and huge impact on their margin. They would rather ignore the new entrants than cut prices due to precedent that would establish over their huge subscriber base. This of course assumes that the mobile WiMAX is ready for the primetime and its ecosystem, in particular the device vendors, can quickly introduce attractive and cost competitive devices to accelerate market penetration.

    Alex Alavi
    [email protected]

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