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Eric Bleeker: Andrew, what's a trend for 2013 you're watching?
Andrew Tonner: I'm going to try not to circle back on any of the obvious ones. Let's take a look at telecom, how about that?
I think we'll see an extension of some of the trends that we saw in the telecom space in the next year, and that's largely the rich get richer and the poor get poorer, with [Sprint Nextel] actually now coming out of that storyline, where they may even be on the verge of bankruptcy with Clearwire potentially pulling them under. Now we see them falling into that category, the upper echelon with the deep pockets of SoftBank buying 70% of the company for $20 billion.
They're going to have enough money now to do things like bid competitively for spectrum and subsidize handsets in a meaningful way where they can actually start acquiring subscribers, but you're going to see, at the lower end, the companies that really don't have those financial resources more or less locked out of this space.
A tangent off of that is the death of rural telecom. The companies, the Windstreams and [Frontier Communications] of the world, the strong get stronger and the weak get weaker. We're continuing to see people deactivate and move out of these spaces.
Investors love this space because it's such a dividend-heavy space; 10% yields are more or less the norm there, but at the same time it's just going to be as risky in 2013 as it was in 2012.
Austin Smith: I have a little bit of a question on this. When you say, "the big heavies," I instantly default to companies like Verizon and AT&T, but both of these companies still have a rural telecom presence. How threatening is that to these companies' long run?
Is the growth in their mobile segment and their other divisions enough to offset that weakness, or is this something that, as an investor, you need to say, "Well, although this division is getting stronger, you've got this anchor here"?
How do you weigh the two?
Andrew: The nice thing for a company that's as large as an AT&T, for instance, their national presence is large enough to really offset a lot of regional weakness. You see a lot of the rural telecom companies be isolated to specific regions, a la the Midwest or something along those lines, but AT&T has a large enough national presence where they can bundle enough packages to at least keep water from coming in.
Now, their revenue mix is substantially weighted toward wireless subscribers, so the larger companies, it's not nearly as much of a risk for them. But at the same time, yeah, it's still an exposure that's not great for them.
Eric: Yeah, I think in the short answer, fixed-line stuff is becoming very minimal.
Tying onto that, too, you mentioned buying spectrum. Holy cow, this Clearwire deal right now, Sprint's about to have twice the spectrum as the other companies. The line was always, "Buy land because they're not making any more of it."
Spectrum, they're not making any more of it, so it's going to be a really fascinating storyline to play out across the year as well.
Andrew: Sprint back from the dead, yeah.
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