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Insights from AT&T’s EBITDA Margin Trend

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AT&T’s EBITDA margin in the last few quarters

In the previous part, we looked at AT&T’s (T) revenue trend over the last few quarters. Now let’s take a look at its combined domestic wireless operations EBITDA (earnings before interest, tax, depreciation, and amortization) margin.

AT&T has been showing a lot of improvement in its EBITDA margin for the past few quarters. As for operating profitability, its adjusted EBITDA margin continued to strengthen YoY (year-over-year) in 1Q17. The metric rose from ~40.8% in 1Q16 to ~41.8% in 1Q17 and reported its best EBITDA margin, according to the company.

Although the traditional wireless business remains as intense as ever, AT&T was able to expand its EBITDA margin due to the transition of customers to non-subsidized pricing plans. AT&T continues to operate efficiently and focuses on efficient cost management.

The company also expects solid synergy potential from the proposed acquisition of Time Warner (TWX) by the end of the third year on a run rate for $1.0 billion in cost savings and cash flow generation.

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Peer comparison for EBITDA margin

According to company filings, Verizon’s (VZ) and T-Mobile’s (TMUS) consolidated adjusted EBITDA margins were 37.3% and 36.0%, respectively, in 1Q17. Sprint’s (S) adjusted EBITDA margin was 43.8% in fiscal 4Q16, which ended in March 2017. Sprint is enjoying higher margins than its competitors due to cost savings and higher equipment contribution.

Next, let’s take a look at AT&T’s postpaid phone net additions.

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