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

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Nov. 9 2016, Updated 8:04 a.m. ET

AT&T’s scale

As of October 31, 2016, AT&T was the largest US telecom player. Verizon Communications (VZ) was the second-largest, and T-Mobile (TMUS) was the third-largest player by market capitalization. Notably, Sprint’s (S) market capitalization remained lower than T-Mobile’s.

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AT&T’s valuation multiples

Price-based multiples take into account value from a shareholder’s perspective, whereas EV-based (enterprise value) multiples help investors understand the value of a company via its sources of capital from the shareholders’ point of view. These are forward multiples based on expected values after one year.

Now let’s look at the earnings multiples for AT&T and its peers as of October 31, 2016. AT&T was trading at a forward PE (price-to-earnings) multiple of ~12.30x, just higher than Verizon’s ~12.02x. AT&T’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) metric was ~6.31x, higher than Sprint’s and T-Mobile’s ratios of ~5.12x and ~6.08x, respectively.

Notably, AT&T’s dividend yield was ~5.4% on October 31, 2016—higher than Verizon’s ~4.8%.

Now let’s take a look at analysts’ recommendations for AT&T’s stock.

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