Week In Review: U.S. Wireless Carriers

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The U.S telecom market saw significant activity last week, with Sprint (NYSE:S) and T-Mobile cutting prices sharply and introducing new innovative plans to lure customers. However, there wasn’t a lot of movement in share prices, as it is still unclear whether there will be a full-on price war. A new report comparing the major wireless carriers in the country was recently released by Rootmetrics, which looked at various parameters such as network reliability, call performance, network speed and data performance. The report indicated that Verizon (NYSE:VZ) and AT&T (NYSE:T) are far ahead of T-Mobile and Sprint in overall network performance. Verizon and AT&T currently lead the U.S. wireless market with shares of about 34% each, followed by Sprint and T-Mobile with shares of 16% and 15%, respectively. [1] [2] [3]

Below are some significant events pertaining to the top wireless providers that were witnessed last week.

Verizon

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Verizon was declared as the overall best wireless carrier in the latest Rootmetrics report, leading the market in almost all parameters. The market leader announced plans to launch its VoLTE service nationwide in the “coming weeks”, following years of delays. The carrier also introduced ‘Push to Talk’ services for its business customers last week, teaming up with Push to Talk provider Kodiak Networks. Available only on a few devices to start with, the service will be free for the first six months. [4] ((Verizon Introduces Push To Talk Services For Business Accounts, Android Headlines, Aug 24 2014))

We estimate revenues of about $124 billion for Verizon in 2014, with non-GAAP EPS of $3.56, which is in line with the market consensus of $3.45-$3.66, compiled by Thomson Reuters. We currently have a $52 price estimate for Verizon, which is about 5% ahead of the current market price.

AT&T

AT&T merged its Mobility and Business Solutions (Enterprise) divisions last week, reflecting the company’s shift to integrating its wireline and wireless operations. The serving President of Emerging Devices for AT&T Mobility, Glenn Lurie, was elevated to the post of CEO of the new division following this merger. [5] The carrier added its high speed 4G LTE service to 12 new markets last week, taking its total coverage to well over 600 markets. Amid all this activity, AT&T was conspicuously silent on the dramatic announcements of price cuts by Sprint and T-Mobile. It is probably waiting to see how customers react to these offers before entering into any sort of price competition. [6]

We estimate revenues of about $134 billion for AT&T in 2014, with non-GAAP EPS of $2.83, which is slightly higher than the market consensus of $2.48-$2.75, compiled by Thomson Reuters. We currently have a $38 price estimate for A&T, which is more than 5% ahead of the current market price.

Sprint

Sprint was arguably the most active wireless carrier last week, with increased marketing and promotional activity to lure new subscribers. Even though the carrier was placed last in overall performance among all major U.S. carriers in the latest Rootmetrics report, it heavily advertised its network performance in some key areas where it did well, such as Tulsa, Vermont, Wyoming, Indianapolis and Atlanta. The carrier also launched an international Wi-Fi calling back service on the Samsung Galaxy S4 with its new Spark program. [7]

The company’s stock witnessed a steep fall in the middle of August due to weak investor confidence owing to its declining subscriber base. Thus, our $8.50 price estimate for Sprint is significantly above the current market price. We estimate revenues of about $36 billion for Sprint in calendar year 2014.

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Notes:
  1. Rootmetrics Report H1 2014 []
  2. Report: T-Mobile overtakes Sprint in Q1 as No. 3 U.S. smartphone buyer, Fierce Wireless, May 22 2014 []
  3. Wireless Quick Facts, CTIO.org, June 2014 []
  4. Verizon announces initial rollout of VoLTE, HD voice for the ‘coming weeks’, The Verge, Aug 26 2014 []
  5. Glenn Lurie named CEO of AT&T Mobility as it merges with Business group, Endgadget, Aug 26 2014 []
  6. AT&T Throws Up LTE Network In Twelve New Markets, Android Headlines, Aug 27 2014 []
  7. Press Releases, Sprint []