uploads///Telecom Forward EV EBITDA

Behind Sprint’s Value Proposition in the US Telecom Market


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).

Article continues below advertisement

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.


More From Market Realist