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.

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.

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 (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.

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

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.”

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

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

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.

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

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.

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

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.

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.

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.

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.

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.

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.

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.

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

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

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.

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 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.

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.

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

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

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.

As of June 24, 2016, AT&T was the largest global telecom company by market capitalization.

The biggest global telecom company by market capitalization was AT&T as of June 22, 2016.

As of June 9, 2016, Verizon is the third-largest global telecom company by market capitalization.

In fiscal 4Q15, Sprint’s postpaid churn figure was ~1.7%. Verizon had the best retention of postpaid customers, with a postpaid churn of ~0.96% in 1Q16.

Frontier Communications’ (FTR) acquisition of Verizon’s (VZ) wireline assets in California, Florida, and Texas was completed on April 1, 2016. According to Frontier, it was a $10.5 billion deal.

Thomas M. Rutledge shed more light on the FCC’s merger conditions for the expansion of Charter Communications’ mass-market broadband footprint.

During the recent MoffettNathanson Media and Communications Summit 2016, Fran Shammo, Verizon’s (VZ) executive vice president and CFO, discussed the company’s key challenges in its 5G deployment.

On May 13, 2016, AT&T was the world’s largest telecom company by market capitalization. China Mobile (CHL) and Verizon (VZ) ranked second and third.

The merger of Charter Communications (CHTR), Time Warner Cable (TWC), and Bright House Networks was completed on May 18, 2016.

By the end of 1Q16, Verizon’s subscribers rose ~4.4% YoY to reach ~107.2 million in the postpaid component.

As of April 22, 2016, Frontier Communications (FTR) has a market capitalization of ~$6.6 billion. Frontier Communications has a forward annual dividend yield of ~7.8%.

Analysts anticipate that Sprint’s losses will increase YoY during fiscal 4Q15. The consensus believes its adjusted loss per share will be ~$0.11.

In 4Q15, Frontier Communications’ revenue was ~$1.4 billion, ~$257 million of which came from its Connecticut operations.

Wall Street anticipates that AT&T’s (T) prepaid customer growth has maintained momentum in the domestic wireless space in 1Q16.

According to analysts, AT&T’s postpaid churn metric is expected to be ~1.08% in 1Q16.

AT&T had postpaid net additions of ~0.53 million in 4Q15 as compared to ~0.85 million during 4Q14.

T-Mobile’s revenue increased marginally by ~1.1% YoY to reach ~$8.2 billion in 4Q15. The carrier’s postpaid and prepaid segments continued to drive growth in the service revenue.

According to the consensus analyst estimates, Verizon’s revenue is projected to grow by ~1.7% year-over-year to ~$32.5 billion for 1Q16.

Verizon (VZ) will report its results for 1Q16 on April 21, 2016. Wall Street analysts expect that on a year-over-year basis, the carrier’s earnings growth momentum will slow down during 1Q16.

T-Mobile’s Binge On and Music Freedom add weight to the service proposition of the fastest-growing wireless carrier among the top four in the US.

According to the consensus of Wall Street analysts, Frontier’s revenue in 1Q16 is expected to be ~$1.4 billion.

Instead of getting direct exposure to the players in the US telecom industry, you can consider getting diversified exposure to the space with the Technology Select Sector SPDR Fund (XLK).

Assets from the Verizon transaction were ~1.2 million, ~3.3 million, and ~2.1 million for Fios video, voice, and broadband, respectively, in 2015.

AT&T GigaPower is a fiber-based video, Internet, and voice service capable of providing Internet speeds of a maximum of 1 gigabit per second.

AT&T is looking at an option to boost Internet speeds over its copper network. According to the company, G.fast “could significantly boost broadband speeds.”

~70% of the total analysts covering Sprint gave it a “hold” while ~23.3% gave it a sell.

Based on the 1st Half 2016 Metro Area RootScore Report for Riverside, T-Mobile’s network reliability position among the top four US wireless carriers improved by a notch.

A report by 451 Research dated March 28, 2016, highlighted the robust expansion in T-Mobile’s market share in the US wireless telecom industry.

Based on the 1st Half 2016 Metro Area RootScore Report for San Francisco, in the call performance category, Sprint and T-Mobile’s rankings improved by one and two notches, respectively.

Of the analysts covering Frontier stock, 72.2% have recommended a “buy” as of March 28, 2016. About 22.2% have recommended a “hold,” and 5.6% have recommended a “sell.”

According to the FCC, the bidders who don’t have at least 45 MHz of holdings of coverage spectrum in a local area get a maximum spectrum reserve of 30 MHz in that area in the incentive auction.

Sprint is the fourth largest wireless carrier in the saturated US wireless space. Its YoY growth for postpaid subscribers has been in the positive territory since fiscal 1Q15.

April 1, 2016, is the expected completion date of Frontier Communications’ (FTR) acquisition of Verizon’s wireline assets in California, Florida, and Texas.

T-Mobile has been adding low-band spectrum holdings.

Over the last few months, US telecom stocks have generated more returns than the broader S&P 500 Index.

In 1H16, Verizon, Sprint, and T-Mobile shared second place in text performance.

AT&T (T) retained its top spot in network reliability in 1H16. However, unlike 2H15, it had to share this position with Verizon (VZ) and T-Mobile.

Verizon (VZ) retained its top position in the overall network performance metric for Orlando in 1H16.

According to RootMetrics’ 2H15 national results, Verizon received the highest network performance rating among the top four US (SPY) wireless providers.

Organically, TEF’s revenue rose robustly by ~18% year-over-year to ~1 billion euros in Argentina during 4Q15.

The postpaid customer retention of Sprint’s platform continued to improve significantly YoY (year-over-year) in fiscal 3Q15 (calendar 4Q15).

In this series, we will look at some of the key points that Verizon highlighted during the Deutsche Bank Media, Internet & Telecom Conference on March 8, 2016.

Telefónica reported its 2015 results on February 26, 2016. The telecom player’s revenue figure was ~47.2 billion euros for the year.

Family accounts typically have sticky customers. As of the end of 4Q15, Verizon continued to have the best postpaid customer retention among the top four US wireless carriers.

As of February 25, 2016, Verizon is the third-largest global telecom player by market capitalization. It follows China Mobile (CHL). The largest is AT&T (T).

In this series, we’ll look at David Small’s comments on Verizon at the Jefferies Media & Communications Conference, including the agreement to buy the fiber assets of XO Communications.

In the US wireless space, Verizon and AT&T have significant holdings in low-band spectrums. T-Mobile and Sprint have smaller holdings in these spectrums.

Sprint has provided a Better Choice Plan that is comparable to the Verizon Plan. But Sprint’s Better Choice Plan offers 3 GB of shareable data.

Frontier Communications (FTR) reported its fiscal 4Q15 results on February 23, 2016. On an adjusted basis, Frontier surprised Wall Street analysts with positive earnings.