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Sprint’s Value Proposition in the US Telecom Space

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Sprint’s scale

As of May 5, 2016, Sprint (S) is the fourth-largest US wireless carrier. It’s also predominantly a mobile telecom company. As we mentioned earlier in this series, during fiscal 4Q15, Sprint’s wireless and wireline components saw revenues of ~$7.7 billion and ~$0.56 billion, respectively. Its EBITDA (or earnings before interest, tax, depreciation, and amortization) from the wireless and wireline segments were ~$2.1 billion and ~$0.02 billion, respectively, during the same quarter.

Notably, 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).

Sprint's Value Proposition in the US Telecom Space

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Forward enterprise multiples: Sprint versus peers

As you can see in the above graph, as of May 5, 2016, Sprint’s forward EV-to-EBITDA (enterprise-value-to-EBITDA) multiple was ~4.7x. This is the lowest among the top four US mobile players. The figure for T-Mobile (TMUS) was ~5.4x on the same date. AT&T and Verizon had multiples of ~6.5x and ~6.8x, respectively, as of May 5, 2016.

For diversified exposure to telecom companies in the US, you might consider investing in the iShares Russell 1000 Value ETF (IWD). IWD held a total of ~2.7% in AT&T, Verizon, Level 3 Communications (LVLT), CenturyLink (CTL), and T-Mobile at the end of March 2016.

In the next and final part, we’ll check in with analyst recommendations.

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