Telecom Company Comparison…$VZ, $T, $Q, $S

Note:  As of the date of this post, I am long VZ.


The Telecom industry has been a very talked-about industry within the past year…Verizon vs. AT&T, Android vs. iphone, Fios, smart phones, internet TV…..etc.  The below analysis is very high-level and is not meant to be an all-inclusive research analysis to perform your fundamental and technical stock analysis.  It is simply meant to present the charts of Verizon, AT&T, Qwest, and Sprint.

I would be most focused on $VZ and $T for the four companies listed below.  I’m not very interested in $Q or $S.  I don’t think Sprint can compete in terms of bandwith and amount of users and I just don’t know enough about Qwest to have any meaningful commentary.  Let’s face it, VZ and T are the companies that are in the news on a daily basis and the companies that are currently fighting over the iphone.  If VZ can sell the Android and iPhone smart phones, I think they will be best of breed in this category.  I don’t like their quarterly revenue growth (year-over-year) being negative, but I’ll have to look into that.  Additionally, EPS and the P/E ratio I believe to be misleading due to minority interest items.  For example, for the quarter ended 9/30/10, VZ had Operating Income of $3.7 billion.  On an annual basis, for the fiscal year 2009, VZ had Operating Income of $14.0 billion compared to T which had $21.5 billion (hmmm interesting).  Gross margin for the trailing-twelve-month (TTM) period was 60.27% for VZ and 58.94% for T…pretty similar with the slight edge going to VZ.  Let’s find out what EBITDA is as a percentage of Revenue….

Interesting how close the percentages are for EBITDA as a percent of Revenue.  Looks like AT&T is approximately 100 basis points better than Verizon in terms of EBITDA %.  Another value that I would like to understand is EBITDA per share……upon further calculation, I came up with some interesting figures.  VZ was 12.5 and T was 7.1, which is one calculation that leads me into liking the value of VZ more than T.  EBITDA (as defined: Earnings Before Interest, Taxes, Depreciation and Amortization) is one of the most important factors when valuing a business.  Most private company deals are valued based on a multiple of EBITDA, not Net Income and “Earnings Per Share.”  I think that I would like to utilize this type of calculation more in my fundamental stock analysis for public companies as well.

The first chart below presents a direct competitor comparison of the Telecom industry, which was derived from Yahoo! Finance.

Below this table are stock charts for the four aforementioned Telecom companies, as listed below (with links to current stock quotes):

Verizon (VZ)

AT&T (T)

Qwest (Q)

Sprint (S)