Ray Sheffer

Sprint is cutting down on operating costs to manage high capital expenditures. But marginal cash flows aren’t alleviating Sprint’s liquidity concerns.

Out of 36 recommendations by Wall Street analysts on AT&T’s stock, half were “buy” recommendations and ~44.4% were “hold” recommendations. The remaining ~5.6% of the analysts recommended a “sell.”

In 2014, Verizon acquired Intel’s (INTC) OnCue, an Internet TV service, which was to be used in the user interface of the go90 service.

As of February 11, 2016, ~78.6% of analysts surveyed have given “buy” recommendations for T-Mobile, 17.9% have given “hold” recommendations, and ~3.6% have given “sell” recommendations.

Despite the decline in wireline revenue, the segment’s operating income grew marginally by ~1% year-over-year, or YoY, during 4Q14.

Beginning in 4Q16, AT&T plans to initiate the three services—DIRECTV Now, DIRECTV Mobile, and DIRECTV Preview.

Brazil was the largest contributor to AT&T’s revenue from Latin American operations during 3Q15.

On the positive side, growth in AT&T’s net additions of connected devices continued to be solid during 2Q15. AT&T added ~1.4 million connected devices during the quarter.

AT&T’s connected devices increased 21% year-over-year during 4Q14. The company added 1.9 million customers and connections in the fourth quarter.

Verizon is leveraging its acquisitions of AOL, upLynk, OnCue, and EdgeCast for its new over-the-top service.

Vodafone service revenue in Itay fell ~8.8% YoY (year-over-year) to reach ~0.93 billion pounds.

Sprint (S) has an annual cost-cutting initiative of at least $2 billion for fiscal 2016. These cuts are expected to come from operating expenses.

Verizon (VZ) will report its 1Q15 results on April 21, 2015. It’s the largest US telecom company. It had a market capitalization of $200.08 billion as of April 13, 2015.

Looking at Sprint’s profitability, Wall Street analysts expect Sprint’s EBITDA for the quarter to decline by ~3% due largely to a lower revenue base.

During the quarter, T-Mobile’s prepaid subscribers increased robustly by ~8.1% YoY to reach ~17.6 million.

T-Mobile is expected to report its 1Q16 results on April 26, 2016. According to Wall Street analysts, on an adjusted basis, T-Mobile’s earnings are expected to grow significantly year-over-year in 1Q16.

As of April 11, 2016, ~52.6% of Wall Street analysts’ recommendations for CenturyLink’s stock were “holds,” 15.8% were “sells,” and ~31.6% were “buys.”

Frontier continued to add broadband customers on a net basis in 1Q16. These net additions were 24,600 for the quarter.

Most Wall Street recommendations for Verizon (VZ) were “hold” as of February 25, 2016. About 44.1% were “buy” recommendations, and there were no “sell” recommendations.

Verizon commanded the best customer retention rate among the top four carriers in the US in 2Q15.

During the Deutsche Bank Media, Internet, & Telecom Conference, John J. Stephens talked about AT&T’s domestic video component after the DIRECTV merger.

As of April 5, 2016, globally, AT&T was the largest telecom player by market capitalization. China Mobile (CHL) followed.

In fiscal 3Q16, Vodafone’s mobile customers in Germany decreased ~3.6% YoY to reach ~30.4 million.

Out of 36 analyst recommendations, ~50% were “buys,” ~44.4% were “holds,” and ~5.6% were “sell” recommendations on AT&T’s stock.

In the first three quarters of 2014, Verizon’s Global Enterprise revenues declined by ~4.2%. They’re expected to decline by ~4% year-over-year in 2014.

According to Verizon, its Edge penetration rate increased significantly during 4Q14. Higher Edge penetration should positively impact its 4Q14 earnings.

21st Century Fox’s Filmed Entertainment segment performed well in the last two quarters. The segment’s revenue grew by 5% year-over-year to $2.4 billion in 3Q15.

T-Mobile had a forward price-to-earnings ratio of 20.9x on November 18, 2015. Its forward five-year price/earnings to growth ratio was 0.65.

Mobile revenue in Argentina grew robustly by 21.6% YoY organically to reach 0.66 billion euros during the quarter. The mobile service revenue component increased 24.9% YoY organically.

According to Sprint, it has planned to rationalize annual costs by at least $2 billion from fiscal 2016.

During 3Q15, Telefonica’s mobile revenue declined 2.6% YoY to 1.1 billion euros in Spain. A robust YoY increase in mobile data revenue limited the decline in mobile service revenues.

According to RootMetrics 2H14 national results, out of the four largest national wireless carriers, T-Mobile ranked third in terms of network speeds.

Sprint’s postpaid upgrades increased to ~11.5% during fiscal 3Q14. During the quarter, the postpaid upgrades increased both sequentially and YoY.

During 4Q15, the data revenue stream of Telefónica’s mobile component rose by ~30.2% organically YoY to reach ~0.25 billion euros in Argentina.

Recently, T-Mobile’s chief financial officer and executive vice president shed light on the geographic segmentation of T-Mobile’s customer growth profile.

AT&T GigaPower is a fiber-based, high-speed Internet service for consumers and businesses. With the DIRECTV transaction, the service will be expanded to reach 2 million additional customers.

Year-over-year, Telefónica’s mobile revenue rose by ~2.8% to reach ~1.8 billion euros in Germany.

CenturyLink’s revenue increased by ~0.9% YoY to reach ~$4.6 billion during the quarter. The company’s revenue was almost even with Wall Street’s expectations.

The cross-sell potential for wireless services to DirecTV households was ~15 million. The opportunity for mobile video services was ~21 million households.

As of August 31, 2015, Android Wear for iOS is operational on LG’s Watch Urbane.

Verizon is managing the secular challenges of the pay-TV space by focusing on its broadband offering in FiOS.

During 3Q15, AT&T’s Mexican wireless operations generated ~$581 million of revenue.

After the approval of the Cablevision transaction by the New York Public Service Commission, Moody’s Investors Service cut Cablevision’s Corporate Family Rating from Ba2 to B1.

In the US and around the world, the telecom industry is regulated because market forces can’t maintain competition within the highly capital-intensive industry.

Post-paid users pay telecom companies periodically. The users pay after they received the service. They typically subscribe to plans for a fixed term.

In this part, we’ll look at one of the reasons behind Sprint’s 50% discount for competitors’ customers.

Investors often use different metrics to determine telecom companies’ relative valuation. Telecom is a capital-intensive industry with high fixed costs.

Investors that like the US telecom industry’s fundamentals—for example, stable cash flows and high dividend yield—may invest in telecom ETFs.

Adjusted revenue from IP-based strategic services grew by 14.3% YoY in 4Q14. Adjusted consumer wireline revenue increased by 2.4% during the quarter.

Sprint’s offer to the customers of other wireless carriers is for monthly charges associated with the service plan as well as the access line.

Out of 36 recommendations on AT&T’s stock, around half gave “buys.” The proportion of “hold” recommendations on the stock was ~44.4% as of April 18, 2016.

At the end of 2014, U-verse evolved as a substantial revenue stream for AT&T’s (T) wireline division. Consumers contributed ~96% to adjusted U-verse revenue during 4Q14.

Verizon Fios Internet and video customer acquisitions have come down significantly on a net basis in 1Q16 from the levels in 1Q15.

The launch of Apple’s iPhone 6 in September, just before the holiday season, was a key driver for Sprint’s increased promotional efforts during fiscal 3Q14.

At the end of 1Q16, Suddenlink and Cablevision had ~1.6 million and ~3.1 million customer relationships, respectively.

One of the key factors that helped AT&T manage low churn levels is its installment plan—Next. Customers can own a smartphone without a down payment.

AT&T is currently focusing on Mexico, a growing mobile market. Mobile subscribers in Mexico were a significant 105 million in 2013.

An improving broadband proposition with higher Internet speeds should positively affect Cablevision (CVC), considering the competitive dynamics in its industry.

Sprint initiated the “Direct 2 You” service on April 13 in the Kansas City metro market. The service will be extended to Miami and Chicago on April 20.

California is the only state where the merger between Charter Communications, Time Warner Cable, and Bright House Networks has yet to be approved. It could be approved as early as May 12.

In this part, we compare Sprint’s earnings multiples with those of its peers in the US wireless telecom market.

Let’s see what kind of scale Cablevision and Suddenlink may give Altice in the US cable space compared to some of its peers.

Sprint’s chief financial officer Tarek Robbiati discussed this second reason for the company’s 50% discount promotion.

On a YoY (or year-over-year) basis, Suddenlink’s revenue rose ~6.7% to reach ~$0.63 billion in 1Q16.

Telecom companies compete directly with cable companies—particularly in wired voice, data, and TV services. They compete in the residential and small business segments.

We mentioned how wireless phones communicate with cell towers on a frequency band. The band is called a spectrum. It’s the most valuable resource for a wireless company.

The growth trend in Charter’s core operating profitability further strengthened during the quarter. Charter’s adjusted EBITDA increased 10.4% YoY.

T-Mobile’s capital expenditures are expected to grow 20.3% year-over-year to $1.1 billion in 2Q15. Wall Street expects T-Mobile to generate sufficient cash flows to fund its capital investments in 2Q15.

Sprint’s forward EV-to-EBITDA (enterprise-value-to-EBITDA) multiple was ~4.7x. This is the lowest among the top four US mobile players.

America Movil’s Telcel and Telefonica Mexico currently dominate this wireless market. AT&T plans a significant LTE expansion into this market through 2018.

According to RootScore’s 1H16 report, Verizon, T-Mobile, and Sprint held their prior first, second, and fourth places, respectively, in network performance.

Verizon’s CFO and EVP, Fran Shammo, talked about how important the 600 MHz or megahertz spectrum is for the company.

Based on the Wall Street analysts’ consensus estimates, Sprint’s revenue is expected to fall ~4.5% year-over-year to reach ~$8.1 billion in fiscal 2Q15.

Level 3’s revenue was $2.1 billion in 4Q15. This figure was 0.5% below the consensus estimate of Wall Street analysts. In 4Q14, the company’s revenue was $1.9 billion.

Level 3 Communications (LVLT) reported its 4Q15 results on February 4, 2016. The market received the results and guidance for 2016 positively, and the stock rose 6.9%.

During 3Q15, Verizon continued to have the best customer retention among the top four telecom players.

Sprint received the highest score for network speed in 1H15 among the four national carriers in the Denver market. This is a significant achievement for Sprint.

Tablets should have contributed to managing Verizon’s churn. In 4Q14, Verizon had the best postpaid churn among the four largest US wireless carriers.

Sprint’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew robustly on a YoY basis from ~$1 billion in fiscal 3Q14 to ~$1.9 billion in fiscal 3Q15.

The majority of analysts recommended “holds” on Verizon as of April 25, 2016. These recommendations represented ~66.7% of the total.

As of January 21, 2016, EV-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) was 5.6x for Sprint, 7x for AT&T, 6.3x for Verizon, and 7.3x for T-Mobile.

During fiscal 3Q15, Sprint had positive postpaid customer additions. Sprint platform’s postpaid additions grew YoY significantly from just ~0.03 million in fiscal 3Q14 to reach ~0.5 million during fiscal 3Q15.

AT&T’s net postpaid additions were a significant ~1 million in 2Q14. That’s much higher than what’s being projected for 2Q15.

Wireless is the key segment of Verizon’s business. It generated revenue and EBITDA of ~$22.6 billion and ~$9.9 billion, respectively, in 2Q15.

Verizon’s CEO and chairman highlighted the importance of proactively addressing pay-TV industry challenges.

Verizon got the top spot in all of RootMetrics’ performance categories in 2H15, although it shared first place in the text performance category with AT&T.

Sprint’s revenue again missed Wall Street’s expectations. Revenue came in ~1.6% below the consensus estimate.

Sprint shared the top spot in call performance with AT&T and Verizon in the Lansing market for 1H15. In text performance, Sprint shared the top spot with T-Mobile and AT&T.

Edge’s take rate—customers choosing the plan—increased significantly from 1Q14 to 4Q14. Verizon expects it to expand to the range of 34%–35% in 2015.

Frontier’s earnings in 3Q15 surprised Wall Street analysts, as it was expected to have loss for the quarter.

T-Mobile’s solid postpaid customer growth continued in 3Q15. Its postpaid subscriber base grew by 17.3% year-over-year to approximately 30.4 million.

Sprint’s stock price movement in the one-month and three-month periods were in the positive territory as of as of March 11.

In broadband, AT&T’s and Comcast’s coverages are comparable, but Verizon’s operations are smaller. In scale in content, AT&T and Comcast outweigh Netflix.

At the end of 1Q16, Charter’s video customers had increased 0.9% YoY and reached 4.4 million. This was well above the company’s estimated video penetration level for the quarter.

T-Mobile is expected to report its 2Q16 results on August 4, 2016. According to analyst consensus, T-Mobile’s core operating profitability is expected to expand significantly YoY.

Media networks face stiff competition for acquisition and distribution of content. Quality and exclusivity add to competition across the media value chain.

With the merger of Charter Communications (CHTR), Bright House Networks, and Time Warner Cable (TWC), the US cable space has consolidated even more.

According Wall Street analysts as of July 10, 2015, there will likely be low growth in Verizon’s revenue during 2Q15. They expect the revenue to rise ~3% YoY.

According to Wall Street analysts’ consensus as of July 10, on an adjusted basis, Verizon’s EBITDA is expected to rise moderately by ~5% YoY during 2Q15.

Recently, Verizon 4G secured the top spot nationally in PCMag’s Fastest Mobile Networks 2016 report.