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CenturyLink’s Value Proposition in the US Telecom Market

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CenturyLink’s size

Earlier in this series, we looked at the anticipated performance of CenturyLink (CTL) in 2Q16. In this part, we will look at some value-centric measures of the telecom company and some of the key players in the US wireline telecom market.

Let’s start with the scale of CenturyLink compared to some of its peers with operations in this space.

As you can see in the above chart, on June 27, 2016, CenturyLink had a market capitalization of ~$15 billion. Looking at some other players in the wireline space, Windstream Holdings’s (WIN) market capitalization was ~$0.85 billion. The market capitalization of Frontier Communications (FTR) was ~$5.5 billion on that date.

In the integrated telecom space in the US, these figures for AT&T (T) and Verizon (VZ) were ~$259 billion and ~$223.3 billion, respectively, on June 27.

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CenturyLink’s dividend yield

On June 27, 2016, CenturyLink had a forward dividend yield of ~7.9%. Meanwhile, the same yields for Frontier and Windstream were ~9.3% and ~6.8%, respectively.

The similar dividend metrics of Verizon and AT&T were ~4.2% and ~4.6%, respectively, on the same date.

Enterprise value multiples of CenturyLink

On June 27, 2016, CenturyLink had a forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of ~5.2x. The same metric of Frontier was ~5x. Integrated players Verizon and AT&T had comparable valuation multiples of ~7.2x and ~6.9x, respectively, on June 27.

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

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