Telecom Companies

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Last Updated: Thursday, 12 June 2025 02:15
Published: Wednesday, 23 April 2025 14:08
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Telecom Companies:

Let's analyze Telecom Cos for investment purposes. These Co provide internet, mobile, TV or other services that basically relates to transfer of information by wire/wireless means.

Wiki => https://en.wikipedia.org/wiki/List_of_telecommunications_companies

Major source of revenue for biggest Telecom Co is mobile services (i.e your cell phone service), followed by internet services (known as Fixed line service) and TV (media) services.

Under Phone section, you can find more details on largest US Mobile operators and MVNO. Mobile operators in US: https://en.wikipedia.org/wiki/List_of_mobile_network_operators_in_the_United_States

Just Top 10 companies generate revenue of $1T. Probably all Telecom Co combined generate revenue of $2T or more worldwide (Just top 100 generate $1.5T, so remaining small players worldwide probably generate $0.5T, just a guess). Telecom Co routinely buy other Co (even unrelated to their main line of business) and routinely sell some of their assets (and buying them back again at higher prices) which make going thru there income statements and balance sheet very cumbersome. They also carry a lot of debt, and routinely issue new debt to buy other companies. They also pay a hefty dividend to shareholders, which is very common with public companies carrying an enormous amount of debt.

Even though net income is low at 10% of revenue, a big chunk of expense is in depreciation and amortization. If we take that out, these Cos generate lot more cash than income. However, their capital expenditure is also very high at >10% of revenue. 

FY 2024 Metrics:

Top 5 companies by revenue are:

  1. China Mobile: It's Chinese state owned telecom Co. It's the largest mobile n/w operator in the world by subscribers and revenue. It used to be listed on NYSE, but was delisted in 2021 due to it's connection to Chinese People's Liberation Army. It was subsequently listed on SSE in China.
    • It had ~1B subscribers as of 2022. It's revenue has grown from $3B in 1997 to $150B in 2023 (mostly in a straight line), while it's earnings have grown from $1B to $25B. It's charging $150/yr per customer, which seems reasonable. It's market cap has been around $200B for the last 15 years (2010 - 2025), which is surprising as it's revenue/profits increased a lot, but didn't help the market cap.
  2. Verizon: It's US  Company, which resulted from breakup of "Bell systems" (later renamed as AT&T) in 1983 into 7 regional Co. It was originally named "Bell Atlantic", but in 2000, changed the name to Verizon Communications after merging with telephone Co GTE in $65B deal. Verizon formed Verizon wireless in 2000 in a joint venture with Vodafone in a deal valued at $70B. It integrated it's own wireless divisions under "Verizon Wireless" and was planning an IPO for it in 2003, but later canceled it, as it made enough profits and didn't need any investor money. At that time, Verizon became the largest local telephone company in USA, operating 63 million telephone lines and 25 million mobile phone customers. In 2004, Verizon was added to DJIA index by kicking out AT&T. Verizon had expanded into optic fiber internet lines, but started divesting from this in 2005 to focus on wireless and Media. In 2006, Verizon bought MCI, a long distance provider for Business clients, for $8B, which caused it's revenue to inc by 20% in 2006. In 2008, Verizon acquired Rural Cellular Corp. for $2.7 billion, and wireless carrier Alltel for $28B. In 2010-2020, Verizon acquired more companies for bilions of dollars (2011=Terremark for $1.4B, 2012=AWS for $3.9B, 2015/2017=AOL and Yahoo for $5B each, and later sold them as part of it's media group for $5B to Apollo in 2021, 2016=>Fleetmetics for $2.4B along with some other companies, 2018=>XO communications for $1.8B, 2020=>Tracfone wireless for $6.5B, ). In 2013, it also bought remaining 45% stake in Verizon wireless from Vodafone for $135B (paid for by issuing 1.27B Verizon shares to Vodafone shareholders). As of 2024, Verizon is planning to buy fiber optic Co, Frontier Communications for $20B. All in all, Verizon has spent > $200B buying Companies in last 20 yrs mostly funded by issuing stocks
    • 146M wireless subscribers and 12M internet subscribers (7M Fiber Optic and 5M Fixed Wireless Access subscribers). It had $130B in revenue and a market cap of $200B.
  3. AT&T: SBC  (one of the baby bells) acquired parent company AT&T Corp in 2005, and renamed merged Co as AT&T Inc., and retained it's logo and marketing. 4 of the baby bells along with parent AT&T are part of AT&T Inc. Other 2 baby bells merged to form Verizon. Cingular wireless (which had acquired old AT&T wireless in 2004) became AT&T subsidiary after SBC bought AT&T in 2006. AT&T acquired Time Warner Cable in 2016 for $110B, but later in 2022 divested completely of it's media arm as Warner Brothers Discovery which was listed as public company.  AT&T went from a revenue of $45B and profit of $7B in 2001 to $118B in revenue and $15B in profit in 2024.Their revenue went as high as $180B when they bought Time Warner, but declined later when they kept on selling their assets. They have mostly US customers, with o< 5% of revenue from Latin America. 2 Primary segments
    1. AT&T Wireless: 118M wireless subscribers. $85B in revenue in 2024, with operating income of $26B, so highly profitable segment. Only $65B came from services, remaining $20B was from equipment (i.e phone) sale. So, on an avg $600/yr per subscriber in phone services, which is very high compared to MVNO.
    2. Wireline (Fiber internet): $32B ($19B = business and $13B = consumer) in revenue in 2024. They made just $0.8B in operating income, though they used to make lot more (i.e in 2022 they made ~$3B in operating income on revenue of $34B). AT&T is getting rid of traditional copper based wireline. Out of total 14M connections in wireline, only 4M customers were on copper lines.
  4. TMobile US: 130M wireless subscribers.
  5. Comcast: 

 

 

Verizon (VZ):

Let's look closely at Verizon's financials from 2000 to 2025.

SEC filings => https://www.verizon.com/about/investors/sec-filings

Stocks outstanding: In 2000, there were 2.7B stocks, went to 2.86B in 2014. From 2004-2005, VZ spent $0.5B in buybacks, then in 2006-2008, it spent $6B. But stock count didn't go down at all due to dilution. Then in 2014, it increased share count by 1.3B shares (due to purchase of Verizon wireless) to 4.16B. To reduce stock count, in 2015, VZ again spent $5B, which brought stock count to 4.08B (it bought 80M shares for $5B). In 2021, VZ bought Tracfone by paying $3B in cash and $3B via 60M of VZ stock. Stock count rose by 120M during 2021 and 2022 getting to 4.2B. From 2023 onwards, stock count has been flat at 4.21B on Jan 31, 2025, which is a good sign.

2 units in business:

  1. Consumer reporting unit (CU)
  2. Business reporting unit (BU)

Debt:

Assets:

  • Wireless License: Carrying value = $156B. It's substantially iess than the fair value estimated based on cash flow. Basically meaning that VZ should be able to resell these licenses for much more than $156B
  • Goodwill => The balance = $23 billion, of which ~$21 billion was in our Consumer reporting unit and ~$1.7 billion was in our Business reporting unit. At end of 2023, goodwill in CU was $7.5B, but a impairment of $5.8B reduced it to $1.7B. Gooodwill in CU was way above fair value.