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



AT&T’s scale in the telecom market

In the earlier parts of this series, we learned about some updates from AT&T (T). Now, we will take a broad look at the value proposition of the company among select telecom companies in the US. Let’s start with AT&T’s size.

On May 13, 2016, AT&T was the world’s largest telecom company by market capitalization. China Mobile (CHL) followed AT&T in this parameter. The third-largest global telecom company by market capitalization was Verizon (VZ) as of May 13, 2016.

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AT&T’s dividend yield

AT&T’s (T) forward dividend yield was ~4.9% on May 13, 2016. It was higher than the same metric for Verizon at ~4.5%.

The same figures for Frontier Communications (FTR) and CenturyLink (CTL) were ~8% and ~7.7%, respectively, on May 13, 2016.

Enterprise value multiples of AT&T

Now let’s look at AT&T’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple. The integrated telecom company had a current year EV-to-EBITDA multiple of ~6.7x on May 13, 2016. This metric was slightly lower than the comparable EV-to-EBITDA multiple for Verizon of ~6.9x.

In the wireline telecom market in the US, the same figure for CenturyLink was ~5.2x on May 13, 2016. In the US mobile space, the EV-to-EBITDA metric of T-Mobile (TMUS) was ~5.8x on the same date.

For a diversified exposure to select telecom companies in the US, you may consider investing in the SPDR S&P 500 ETF (SPY). SPY held ~2.7% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of April 2016.


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