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U.S. Bancorp Piper Jaffray Projects Further Decline in Wireless Infrastructure Demand, Growth in New Subscriptions

- Analyst Publishes Wireless Projections Handbook for Investors -

PORTLAND, Maine, May 29 /PRNewswire/ -- Although he expects low double- digit year-over-year growth in both global wireless subscriber (14.3 percent) and handset (11.3 percent) rates in 2003, U.S. Bancorp Piper Jaffray Senior Wireless Communications Equipment Analyst Samuel May believes the demand for wireless infrastructure will decline by 14.8 percent for the same period. In a new in-depth research report titled 2003 Global Wireless Projections-The Book, May makes forecasts such as these and outlines his expectations and outlook for the wireless industry for 2003 and 2004. This includes forecasts for wireless subscribers, wireless handsets and wireless infrastructure.

Wireless Subscribers

In 2002, wireless subscribers grew by 198 million, down from 224 million net additions in 2001. At the end of 2002, wireless subscribers totaled 1,152 million, up from 954 million in 2001. For year-end 2003, May is forecasting 1,317 million wireless subscribers or net additions of 165 million, which represents growth of 14.3 percent year-over-year. Additionally, in 2004, he anticipates net additions will decrease to 140 million and worldwide subscribers will total 1,457 million (10.6 percent year-over-year growth).

According to May, net subscriber additions in the United States in 2003 are expected to continue to slow, as the market is expected to surpass the 50 percent penetration mark and reach late stage maturation. He is forecasting net additions of 10 million subscribers for the region in 2003. Additionally, China is expected to remain the fastest-growing country with 55 million net additions in 2003, versus 62.0 million in 2002. Code division multiple access (CDMA) is expected to represent 11.0 million of net additions in 2003. India exhibited record growth in 2002 with 5.0 million net additions, up from 2.4 million in 2001. May is forecasting 11.2 million net additions in the region in 2003. Other regions expected to grow nicely in 2003 include Brazil and Russia.

Wireless Handsets

Post first quarter results, May's mobile phone forecast for 2003 remains unchanged at 445 million, which represents 11.3 percent growth from more than 400 million in 2002. In 2004, he expects mobile phone sales to grow by 13.5 percent to 505 million.

May believes the rate of handset replacements will make substantial gains in 2003. The replacement rate is expected to improve to 24.3 percent, versus 21.2 percent in 2002 and 21.4 percent in 2001. In absolute terms, this implies the sale of 280 million handsets in 2003. In 2004, he expects the replacement rate will climb to 27.7 percent, with 365 million replacement handsets sold.

"The catalysts fueling replacements include the increased introduction of color handsets, embedded cameras, MP3 players and value-added features such as global positioning systems and gaming," say May. "Additional catalysts include the replacement of old, outdated phones, many of which are two-plus years old."

Additionally, May expects handset manufacturers such as Nokia Corporation (NOK, Outperform, $17.76, #), SAMSUNG and LG Electronics to grow over coming years. "While original design manufacturers (ODMs) are expected to represent a disruptive force over the next couple of years, we believe a dichotomy will emerge between strong and weak ODMs with the latter beginning to fade away as insufficient unit volumes for smaller players are unable to support viable business models," said May.

Wireless Infrastructure

In 2003, May expects the demand for wireless infrastructure to decline by 14.8 percent (compared with industry expectations of 10-15 percent), as first quarter 2003 results for equipment suppliers were worse than expected and declined by 20 percent year-over-year.

In May's opinion, service providers will maintain a conservative posture with regard to capital investment in 2003, as many remain focused on improving internal financial health of operations and balance sheet metrics.

"Investment in wideband-CDMA (W-CDMA) equipment will continue to languish into 2004, as carriers seek validation for the demand of data services before moving forward with investments," said May. "That said, we believe infrastructure spending will reverse its four-year decline and return to modest growth in 2005."

To receive a copy of 2003 Global Wireless Projections-The Book, clients and members of the media should contact Dana Wade at dwade@pjc.com or 415-277-1556.

About U.S. Bancorp Piper Jaffray

U.S. Bancorp Piper Jaffray, a subsidiary of Minneapolis-based U.S. Bancorp, is a focused securities firm comprised of four business lines: Equities and Investment Banking, Fixed Income Capital Markets, Private Advisory Services and Investment Research. The firm provides a full range of investment products and services to individuals, institutions and businesses and has over 124 offices in 25 states across the country. For more information on U.S. Bancorp Piper Jaffray, visit www.piperjaffray.com .

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The following disclosures apply to stocks mentioned in this report if and as indicated: (#) U.S. Bancorp Piper Jaffray (USBPJ) was making a market in the Company's securities at the time this research report was published. USBPJ may buy and sell the Company's securities on a principal basis. (^) A USBPJ analyst who follows this Company or a member of the analyst's household has a financial interest (a long equity position) in the Company's securities. (@) Within the past 12 months, USBPJ was a managing underwriter of an offering of, or dealer manager of a tender offer for, the Company's securities or the securities of an affiliate. (>) USBPJ has either received compensation for investment banking services from the Company within the past 12 months or expects to receive or intends to seek compensation within the next three months for investment banking services. (~) A USBPJ analyst who follows this Company, a member of the analyst's household, a USBPJ officer, director, or other USBPJ employee is a director and/or officer of the Company. (+) USBPJ and its affiliates, in aggregate, beneficially own 1% or more of a class of common equity securities of the subject Company. (=) One or more affiliates of U.S. Bancorp, the ultimate parent company of USBPJ, provided commercial banking services (including, without limitation, loans) to the Company at the time this research report was published.

Nondeposit investment products are not insured by the FDIC, are not deposits or other obligations of or guaranteed by U.S. Bank National Association or its affiliates, and involve investment risks, including possible loss of the principal amount invested.

USBPJ research analysts receive compensation that is, in part, based on revenues of USBPJ Equities and Investment Banking, which include overall investment banking revenues. USBPJ research analysts who follow this Company report to the Head of Investment Research who, in turn, reports directly to the Chief Executive Officer of U.S. Bancorp Piper Jaffray.

This material is based on data obtained from sources we deem to be reliable; it is not guaranteed as to accuracy and does not purport to be complete. This information is not intended to be used as the primary basis of investment decisions. Because of individual client requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. It is not a representation by us or an offer or the solicitation of an offer to sell or buy any security. Further, a security described in this release may not be eligible for solicitation in the states in which the client resides. Officers or employees of affiliates of U.S. Bancorp Piper Jaffray, or members of their families, may have a beneficial interest in the Company's securities and may purchase or sell such positions in the open market or otherwise.

Notice to customers in the United Kingdom: This report is a communication made in the United Kingdom by U.S. Bancorp Piper Jaffray to market counterparties or intermediate customers and is exclusively directed at such persons; it is not directed at private customers and any investment or services to which the communication may relate will not be available to private customers. In the United Kingdom, no persons other than a market counterparty or an intermediate customer should read or rely on any of the information in this communication.

Securities products and services offered through U.S. Bancorp Piper Jaffray, member SIPC and NYSE, Inc., a subsidiary of U.S. Bancorp (NYSE: USB).

Additional information is available upon request.

SOURCE U.S. Bancorp Piper Jaffray

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding U.S. Bancorp's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.



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