Forward multiples of Sprint and peers
Here, we’ll look at some broad aspects of the value proposition of Sprint (S) in the telecom space in the US as of February 16, 2016. Let’s start with the telecom company’s valuation multiples, specifically its EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization).
As of February 16, Sprint’s forward EV-to-EBITDA was ~5.2x. On the same day, T-Mobile’s (TMUS) comparable figure was ~5.3x. Meanwhile, Verizon (VZ) and AT&T (T) had respective EV-to-EBITDA figures of ~6.7x and ~6.3x.
About Sprint and its peers
Sprint is predominantly a mobile telecom player. The company’s revenue was ~$7.7 billion from its wireless component in fiscal 3Q15 (calendar 4Q15). However, its wireline component’s revenue was just ~$0.58 billion during the quarter.
Among the top four mobile players in the US, AT&T and Verizon have significant wireline operations. AT&T also owns satellite TV provider DIRECTV.
Sprint’s market capitalization was ~$11.1 billion on February 16, 2016. Meanwhile, the market cap for AT&T was ~$225.5 billion and Verizon’s market cap was ~$204.4 billion. Using this metric, AT&T was the largest global telecom player on that date. For T-Mobile, the market capitalization was at ~$29.7 billion on February 16, 2016.
Instead of taking direct exposures to the stocks of US telecom players, you may consider taking a broad-based exposure to this space by investing in the SPDR S&P 500 ETF (SPY). The ETF held a total of ~2.4% in some of the US telecom companies at the end of December 2015.