Let's face it -- it's never good news when a business loses a customer. Well, for wireless telecom equipment makers and their shareholders, Cingular Wireless' $41 billion purchase of AT&T Wireless (NYSE:AWE) this week can only be interpreted as bad news.

With Cingular's (a joint venture between SBC Communications (NYSE:SBC) and BellSouth (NYSE:BLS)) purchase, the pool of major U.S. wireless providers just fell from six to five. And consolidation means less companies for equipment makers to sell to.

For peddlers of mobile technology, the effects do not make for pleasant reading. The rationale behind the Cingular deal was to create cost-saving "synergies," so capital expenditures will no doubt be cut to the bone to ensure those targets are achieved. Don't forget, Cingular will have to swallow the costs of this week's monstrous cash purchase. Even worse, the merger comes at a time when revenue growth for the industry as a whole is flat, at best, and carriers are focused on cutting costs to boost profits. None of this bodes well for equipment makers.

So, what equipment stocks should investors be watching? Are there any hot spots in this market?

As other industry watchers have pointed out, wireless equipment vendor Ericsson (NASDAQ:ERICY), will suffer most from the post-deal fallout. Lucrative contracts with AT&T Wireless may not get renewed post-merger. Poor old Ericsson -- its stock is already feeling the down draft, with shares drifting about 3% lower since Tuesday's close.

Still looking? Lucent Technologies (NYSE:LU) doesn't fare much better than Ericsson. The bulk of Lucent's revenues come from older wireless voice systems. That's too bad, because while overall spending will be flat, at best, there will be faster growth in next-generation wireless products like Internet protocol and broadband. Shifting into faster growth technology may mean more execution risk than Lucent can handle right now. Lucent still needs to slash its own spending if it hopes to stay ahead of falling revenues.

It's hard not to like Nortel Networks (NYSE:NT), though. Two years ago, at the bottom of the telecom market slump, Nortel made some very savvy technology bets. Resisting pressure from analysts to make deeper cuts in R&D to bring down costs, Nortel opted instead to invest in third-generation wireless systems development. Last month's multi-billion dollar supply contract with Verizon Communications (NYSE:VZ), plus big wireless deals struck in China and Europe confirm that Nortel's long-term technology strategy decision is paying off.

But don't get too carried away with Nortel. The next-generation wireless Internet may or may not turn out to be the financial tsunami. It's still in a pretty early stage, with plenty of unknown variables. And with a P/E of 65 for 2004, Nortel isn't cheap.

Besides, the wireless market is still up for grabs, with Internet giant Cisco Systems (NASDAQ:CSCO) working hard in the background, building relationships with the big carriers.

Is Nortel sitting pretty in the upcoming 3G phase for wireless communications? Is it worthy of its hefty P/E? Talk it over with other Fools on the Nortel Networks discussion board. Only on Fool.com.

Motley Fool contributor Ben McClure hails from the Great White North. Believe it or not, he doesn't have a position in any companies mentioned here.