AT&T’s Value Proposition in the US Telecom Space

Earlier in this series, we learned about some recent updates from AT&T (T). Now, let’s look at the value proposition of the company among select telecommunications (telecom) companies in the United States. Let’s start with AT&T’s size.

As of April 5, 2016, globally, AT&T was the largest telecom player by market capitalization. China Mobile (CHL) followed. The third-largest global telecom player was Verizon (VZ) as of the same date.

Now let’s look at AT&T’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple and those of select telecom players in the United States.

AT&T was trading at a forward EV-to-EBITDA multiple of ~6.6x on April 5, 2016. This metric was lower than Verizon’s EV-to-EBITDA multiple of ~7x.

In the US wireline telecom space, the same metrics for CenturyLink (CTL) and Frontier Communications (FTR) were ~5.6x, and ~5.7x, respectively, as of April 5. In the US wireless space, the forward EV-to-EBITDA of T-Mobile (TMUS) was ~5.5x on the same date.

Now, let’s look at AT&T’s dividend yield along with those of select US telecom companies. The company’s forward dividend yield was ~4.9% as of April 5. This was higher than Verizon’s forward dividend yield of ~4.2%. Meanwhile, the same figures for CenturyLink and Frontier were ~6.7% and ~8.4%, respectively, as of April 5.

For diversified exposure to companies in the US telecom space, you may consider investing in the Technology Select Sector SPDR ETF (XLK). XLK held a total of ~11.2% in US telecom players at the end of March 2016.