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What’s AT&T’s Value Proposition in the Telecom Market?

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Updated

AT&T in the US telecom industry

In the previous parts of the series, we looked at some updates from AT&T (T). Now, we’ll look at the value proposition of the carrier among some peers in the US. Let’s start with the carrier’s scale among telecom players.

As of June 24, 2016, AT&T was the largest global telecom company by market capitalization. China Mobile (CHL) followed the company in this metric. The third largest global telecom player by market capitalization was Verizon (VZ) as of June 24.

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Earnings multiples of AT&T

The telecom company had a next year PE (or price-to-earnings) multiple of ~13.7x on June 24, 2016. This multiple was above that of Verizon at ~13.5x on the same date. The metric for CenturyLink (CTL) was at ~11.4x on the same date.

Enterprise value multiples of AT&T

Now let’s look at AT&T’s EV-to-EBITDA (or enterprise value to earnings before interest, tax, depreciation, and amortization) multiple. The telecom company had a next year EV-to-EBITDA multiple of ~6.7x on June 24, 2016. This multiple was lower than Verizon’s at ~7.1x as of the same date.

In the US mobile space, T-Mobile’s (TMUS) EV-to-EBITDA metric was ~5.1x as of June 24, 2016. In the wireline telecom industry in the US, the metrics for CenturyLink (CTL) and Frontier Communications (FTR) were ~5.1x and ~5.3x, respectively, as of June 24.

Instead of getting direct exposure to telecom players, you can consider diversified exposure to the space by investing in the SPDR S&P 500 ETF (SPY). The ETF held a total of ~2.7% in some of the US telecom companies at the end of May 2016. It’s worth noting that AT&T and Verizon made up ~2.5% of this ETF as of the same date.

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