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AT&T or Verizon: Which Has the Better Debt Profile?

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Comparing interest expenses

In 2018, AT&T (T) reported interest expenses of $8.0 billion, a YoY (year-over-year) rise of 26.3%, while Verizon (VZ) reported interest expenses of $4.8 billion, a YoY rise of 2.1%.

Analysts expect AT&T’s interest expenses to rise 13.3% YoY to $2.0 billion in the first quarter but to fall 0.6% YoY to $7.9 billion in 2019, 5.1% YoY to $7.5 billion in 2020, and 5.9% YoY to $7.1 billion in 2021.

Analysts expect Verizon’s interest expenses to rise 2.2% YoY to $1.2 billion in the first quarter and 2.0% YoY to $4.92 billion in 2019. However, analysts expect Verizon’s interest expenses to fall 0.7% YoY to $4.89 billion in 2020 and 5.0% YoY to $4.6 billion in 2021.

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Comparing total debt and free cash flow

At the end of December 31, AT&T’s total debt was $176.5 billion, while Verizon’s total debt was $113.1 billion. Analysts expect AT&T’s total debt to fall 4.3% YoY to $168.9 billion in 2019 and 5.6% YoY to $159.5 billion in 2020. They expect Verizon’s total debt to fall 2.5% YoY to $110.2 billion in 2019 and 4.1% YoY to $105.7 billion in 2020.

Analysts expect AT&T’s free cash flow to rise 12.7% YoY to $25.8 billion in 2019, 3.3% YoY to $26.6 billion in 2020, and 0.0% YoY to $26.6 billion in 2021. Analysts expect Verizon’s free cash flow to be $18.7 billion, $19.4 billion, and $21.1 billion, respectively, in 2019, 2020, and 2021.

Verizon’s dividend yield was 4.5% as of February 11, lower than AT&T’s 6.9%. T-Mobile (TMUS) and Sprint (S) don’t pay equity dividends.

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