By Cassimir Medford

Cingular Wireless kicked off Telecom Fortnight on Wednesday as telecommunications carriers and equipment suppliers present their quarterly and full-year 2006 performance numbers, giving some insight into the industry’s health, or lack thereof.

Next up will be AT&T, Cingular’s parent, followed by Nokia, and a slew of telecommunications stalwarts such as Alcatel-Lucent, which recently provided some troubling guidance, along with Nortel, Verizon Communications, and Sprint Nextel, among many others.

Technically the telecom numbers extravaganza began last week with Motorola’s disappointing fourth quarter results and continued on Tuesday as Alcatel-Lucent issued a dim forecast for its fourth quarter.

The world’s largest telecom equipment maker said it would not turn a profit in its maiden reporting period as a merged company. The company was formed by Alcatel’s purchase of Lucent Technologies (see Alcatel-Lucent Arrives).

The announcement is jangling some nerves on the Lucent side of the merged company. The expectation is that the United States side, not the Paris-based side where Alcatel is and was headquartered, will take the brunt of any resulting layoffs.

United States

Emerging from Darkness

The industry is moving into a crucial period. It has just fully emerged from the economic darkness that engulfed it a few years ago. Since then a number of good things have happened.

Broadband wireless is emerging rapidly. WiMAX is finally moving from the test stage to commercial construction and service rollout. Internet video is immensely popular, and it seems like cell phone users are willing to tune into video while on the run.

HDTV is creating immense demand for bandwidth on the cable TV infrastructure. ABI Research recently estimated that cable operators will spend $80 billion in total investment on their networks in the next five years.

Todd Dagres of Spark Capital believes there will be a lot of opportunities for smaller startups as demand increases for next-generation products and the rate of innovation slows among the established equipment suppliers.

But there are dark clouds on the horizon; some are actually already here. The worldwide telecommunications market is maturing and the mobile segment—the jewel in the crown of the telecommunications market—is starting to show some fatigue.

Less Expenditure

Cingular, for instance, is expected to announce a reduction in capital expenditure. In fact capital expenditure in the overall mobile market has been on a downward trend for the last few quarters—something highly unusual for the mobile market.

“The numbers over the next couple of weeks will not be robust,” said Joe Nordgaard, director of the wireless consulting firm Spectral Advantage. “This is the sign of a maturing market in the developed world, and a price conscious market in the developing world.”

There has been and continues to be a lot of consolidation, both in the carrier and equipment supplier worlds.

“That reduces the number of customers that startups typically sell to,” said Mr. Nordgaard. “The growth is in WiMAX, but the difficulty will be coming up with a strong, compelling alternative to what has already been invested in and deployed.”

Sprint Nextel, which has announced the first major deployment of WiMAX anywhere in the world, has chosen four suppliers so far: Intel, Nokia, Motorola, and Samsung. All are well established players.

But there are opportunities for startups in niche markets. Bandwidth acceleration, mobile user interface, and data applications all seem to be areas devoid of innovative ideas.

“There aren’t a lot of compelling data applications around, and the mechanical design of the cell phone and the attendant software are areas where startups can definitely play,” Mr. Nordgaard said.