Text size
Workers rebuild a cellular tower with 5G equipment for the Verizon network.
George Frey / Getty Images
Investors have had to spend a total of eight hours this past week listening to telecommunications executives, with investor days going from back to back.
Verizon Communications,
T-Mobile USA,
and
AT&T
Wednesday to Friday. Management teams outlined their plans for newly available wireless spectrum licenses and devised their strategies for the 5G era.
AT & T’s depressed stock (ticker: T) was the biggest winner on its investor day, but for reasons unrelated to its core business.
Verizon
(VZ) en
T-Mobile
(TMUS) has meanwhile stuck to both of their proven messages: “Network, Network, Network” for Verizon, and “Leaving Competitors in the Dust” for T-Mobile.
Verizon was the biggest spender in the recently completed C-Band auction, with a whopping $ 53 billion for spectrum licenses and associated cleaning costs. Management made the center of its pitch on Wednesday night. The company expects to invest $ 10 billion to upgrade its network equipment to handle the spectrum – in addition to an existing annual capital expenditure budget of approximately $ 18 billion.
Verizon sees its 5G investments seriously bearing fruit within a few years. He said he expects to increase his service income by at least 2% in 2021, by at least 3% in 2022 and 2023, and by at least 4% in 2024 and beyond.
It’s not much, but it’s a decent clip for Verizon. In a saturated U.S. wireless market, management is set to shift customers to unlimited premium rates for higher prices. It also pointed to new 5G monetization opportunities, such as mobile edge computing for businesses, and a wireless broadband product for homes, which they say will cover 50 million homes by 2025. Verizon shares fell 2.8% after its event.
The highlight of AT & T’s presentation on Friday morning was not telecommunications related. The company has unveiled a significantly higher subscriber target for HBO Max and HBO, and management has unveiled detailed plans for an ad-supported level and international launches. Other clues and comments largely repeated the previous remarks.
That seems to be enough to focus on, and AT & T’s share rose 0.9% on Friday. The company now expects to have up to 150 million streaming subscribers by 2025, compared to its previous forecast – by the end of 2019 – up to 90 million.
The market has recently multiplied the valuation of streaming services on revenue only and the growth of subscribers alone – in contrast to AT & T’s slow – growing and capital – intensive telecommunications businesses.
Netflix
stocks (NFLX) have long traded predominantly on its subscriber numbers, while ambitious targets of
ViacomCBS
(VIAC) and
Discovery
(DISCA) shares recently soared. But AT&T may not get as much credit because of its conglomerate structure.
AT&T and Verizon remain valuable investors – Warren Buffett’s
Berkshire Hathaway
(BRK.B) recently took an interest in the latter – and no management team has done much to change that. Trading for nine and 11 times the forward earnings, respectively, and with a solid annual dividend yield of 7% and 4.4%, it certainly looks attractive relative to the market. But there is much more growth elsewhere.
T-Mobile’s meeting on Thursday afternoon, about a year after acquiring Sprint, focused on the company’s progress with the integration of its former competitor. The management of T-Mobile was not ashamed of its ambitions to gain market share in the rural and suburban US and with business customers – where it lags behind AT&T and Verizon today – and to suggest that the merger would bring even greater benefits than which was first proposed. in 2018. Wall Street expected revised targets for synergy and free cash flow.
T-Mobile raised its merger-related annual cost-saving estimate by 25% to $ 7.5 billion, saying its integration was a year ahead of schedule. The company now sees about $ 20 billion in cumulative free cash flow by 2025, about 20% more than before, opening the door to a potential $ 60 billion repurchase from 2023 to 2025. T-Mobile’s current market value is about $ 157 billion dollars.
Read more Dealer: Higher rates will not kill the stock market. What to do now.
But estimates in this line were already in Wall Street’s consensus numbers. Shares of T-Mobile rose 1.9% to 1.1% on Thursday afternoon while the event continued.
Executing management over the coming years will be crucial, with the share price being earned about 48 times in advance. Nevertheless, T-Mobile remains the most compelling growth story of the US wireless industry.
Write to Nicholas Jasinski by [email protected]