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What Is Sprint’s Value Proposition in the US Telecom Market?

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Scale of Sprint’s wireless and wireline operations

In the previous parts of this series, we looked at some updates for Sprint (S). We also learned about the network performance of the top four US wireless players in the metro markets of Atlanta, San Francisco, and Riverside as per their respective 1st Half 2016 Metro Area RootScore Report. In this part of the series, we will look at the value proposition of Sprint in the telecom market in the US as of March 28, 2016.

Sprint is mostly a mobile telecom company. The company’s wireless and wireline components earned revenues of ~$7.7 billion and ~$0.58 billion, respectively, during fiscal 3Q15.

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Moreover, the telecom company’s EBITDA from its wireless and wireline segments were ~$1.9 billion and ~$0.03 billion, respectively, in the same quarter. Also, note that among the top four US wireless players, AT&T and Verizon have significant wireline operations. Plus, AT&T also owns the satellite TV provider DIRECTV.

Forward multiples of Sprint and peers

As you can see in the above bar chart, as of March 28, 2016, Sprint’s forward EV/EBITDA (or enterprise value to earnings before interest, tax, depreciation, and amortization) was at ~5x. It was the lowest among the top four US mobile players. The EV/EBITDA metric for T-Mobile (TMUS) was at ~5.3x.

Verizon (VZ) and AT&T (T) had comparable EV/EBITDA multiples of ~7x and ~6.6x, respectively, as of March 28, 2016.

Instead of getting direct exposure to the players in the US telecom industry, you can consider getting diversified exposure to the space by investing in the Technology Select Sector SPDR Fund (XLK).

The ETF held a total of ~10.5% in some of the US telecom companies at the end of December 2015.

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