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Behind Sprint’s Value Proposition in the US Telecom Market

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May. 2 2016, Updated 5:06 a.m. ET

Sprint’s scale

Sprint (S) is mostly a mobile telecom company. In 4Q15 (fiscal 3Q15 for Sprint), with its postpaid business as a basis, the company was the fourth-largest wireless carrier in the US.

During fiscal 3Q15 (calendar 4Q15), the company’s Wireless and Wireline segments achieved revenues of ~$7.7 billion and ~$0.58 billion, respectively. Sprint’s EBITDA (earnings before interest, taxes, depreciation, and amortization) from its Wireless and Wireline segments were ~$1.9 billion and ~$0.03 billion, respectively, in fiscal 3Q15.

Behind Sprint's Value Proposition in the US Telecom Market

We should note, however, that among the top four US mobile companies, Verizon (VZ) and AT&T (T) have significant wireline operations. AT&T also owns the satellite TV provider DirecTV (DTV).

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Forward enterprise multiples of Sprint and peers

As you can see in the above graph, as of April 25, 2016, Sprint’s forward EV-to-EBITDA (enterprise value-to-EBITDA) was ~4.9x. This was the lowest among the top four US wireless players, with T-Mobile (TMUS) at ~5.6x, Verizon at ~6.8x, and AT&T at ~6.5x as of April 25, 2016.

Instead of taking direct exposure to the stock of players in the US telecom industry, you might consider taking a diversified exposure to space by investing in the iShares Core S&P 500 ETF (IVV). IVV held a total of ~2.8% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of March 2016.

In the next and final part of this series, we’ll look at analyst recommendations.

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