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Service Providers: I expect a possible softening, but nothing beyond the effects to the larger economy on the whole. Due to the seemingly inelastic demand for mobile service due to it becoming extremely important in our daily lives, we could possibly see an acceleration of fixed mobile substitution if consumers start to cut back spending. This could simply be an acceleration of a current trend. While voice minutes and texts are important, I could foresee consumers scaling back on large data plans which could affect Content Providers (see below).

Handset Providers: The most obvious issue would be a potential delay in handset upgrades if consumers decide to hold off on new spending. The smartphone segment does seem pretty strong in the US and could be buoyed by downward price pressure from new entrants (G1 Android phone at T-Mobile http://www.t-mobileg1.com/g1-announcement.aspx) which would make that buying decision less painful for consumers. I would be more concerned about Handset Providers that have a large market share in financial services (e.g. RIM) since this segment will slow as well.

Credit Providers: This is obviously the area of highest impact and the lifeblood; let’s consider raising capital, private equity and venture capital.  The ability to raise capital will be constrained since banks will be less able to easily release funds, equity (stocks) valuations are reduced due to the downturn of the market so you get less money from stock offerings, and the bond market would demand a higher premium (yield) due to overall risk which reduces the cash generated from the bond sale. Private Equity should remain a strong player as they should have large war chests, but their ability to support highly leveraged deals would be impacted. We already witnessed the unwinding of Alltel to Verizon after only a relatively brief holding, but there are new PE rumors in connection with Sprint’s iDEN Network (http://www.ft.com/cms/s/2/97010fa4-8c11-11dd-8a4c-0000779fd18c,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html). Venture Capital should be the least affected, with the possible exception of raising new money, and should continue to fund the smaller innovators at potentially more favorable terms (for Venture firms) than before.

Network Equipment Providers: This to me seems to be the area of highest risk since tightened credit could cause Mobile Service Providers to slow down their large capital investments for network upgrades. At this time, I don’t believe we are looking at the telecom meltdown of the early 2000’s, but I don’t feel too bullish about this group since they depend on large projects to generate revenues. This actually creates a trickledown effect to Content Providers who rely on those infrastructure upgrades to enable higher speed access by consumers for next generation services.  

Content Providers: This is a pretty diverse “catch all” group, but should have some similar issues. The first consideration is a slowdown in consumer spending may negatively impact content purchases as discretionary spending dries up. This is a larger issue for providers that rely on subscription or pay per use models, but less of an impact for ad supported models that provide free content. Another issue could be a cut back on large data plans by consumers which would also negatively impact the ability to consume content (see above). Finally, they are also impacted by slower rollouts of new phones and new networks (see above). When this segment may still get capitalized, it could be under considerable pressure.

While this is not an exhaustive analysis of the entire industry, it should be enough to spark some thoughts or validate opinions you already have. I would be interested to know your thoughts on this matter.

Update: Since I posted this blog entry, Reuters reported analysts cutting mobile phone forecasts for 2009 due to longer replacement cycles (http://ca.reuters.com/article/technologyNews/idCATRE4969VW20081008?sp=true)