Investors were able to spend a total of eight hours listening to telecom executives last week, with consecutive days of investors since
from Wednesday to Friday. The management teams laid out their plans for the newly acquired wireless spectrum licenses and touted their strategies for the 5G era.
Depressed AT&T stocks (ticker: T) were the biggest winners on their investor day, but for reasons unrelated to its core wireless business.
(TMUS), meanwhile, both stuck to their tried and true messages: “Network, network, network” for Verizon and “Leave competitors in the dust” for T-Mobile.
Verizon was the biggest spender in the recently completed Band C auction, having committed a whopping $ 53 billion for spectrum licenses and associated compensation costs. Management made it the centerpiece of their launch Wednesday night. It expects to invest $ 10 billion to upgrade its network equipment to handle that spectrum, in addition to an existing annual capital expenditure budget of around $ 18 billion.
Verizon sees its 5G investments paying off in just a few years. It said it expects to increase its service revenue by at least 2% in 2021, at least 3% in 2022 and 2023, and at least 4% in 2024 and beyond.
That’s not much, but it’s a decent clip for Verizon. In a saturated US mobile market, management is focused on moving customers to higher-priced premium unlimited plans. He also pointed to new 5G monetization opportunities, such as mobile edge computing for enterprises and a wireless broadband product for the home, which is expected to cover 50 million homes by 2025. Verizon shares fell 2.8% after your event.
The climax of AT & T’s presentation on Friday morning was unrelated to telecommunications. The company revealed a significantly higher subscriber target for HBO Max and HBO, and detailed management plans for a tier supported by advertising and international releases. Other guidance and comments largely reiterated previous observations.
That transmission approach appeared to be sufficient, and AT&T shares rose 0.9% on Friday. The company now expects to have up to 150 million streaming subscribers by 2025, compared to its previous forecast, at the end of 2019, of up to 90 million.
Lately, the market has valued streaming services solely based on revenue multiples and subscriber growth, as opposed to AT & T’s slow-growing, large-cap telecommunications businesses.
stock (NFLX) has long traded predominantly on its subscriber numbers, while the ambitious targets of
(DISCA) have caused those stocks to skyrocket recently. But AT&T might not get as much credit given its conglomerate structure.
AT&T and Verizon Still Attractive to Value Investors: Warren Buffett’s
(BRK.B) recently got involved in the latter, and none of the management teams did much to change that. Trading for around nine and 11 times future earnings, respectively, and with high annual dividend yields of 7% and 4.4%, they certainly look attractive relative to the market. But there is much more growth elsewhere.
About a year after the Sprint acquisition, T-Mobile’s event on Thursday afternoon focused on the company’s progress in integrating its long-time rival. T-Mobile management has not been shy in its ambitions to gain market share in rural and suburban US and with business customers, where it lags behind AT&T and Verizon today, and suggests that the merger will generate even greater benefits than when it was first proposed. in 2018. Wall Street expected revised synergy and free cash flow targets.
T-Mobile delivered, raising its annual merger-related cost savings estimate by 25% to $ 7.5 billion, and saying its integration was a year ahead of schedule. The company now sees about $ 65 billion in cumulative free cash flow through 2025, up 20% from before, opening the door to a potential $ 60 billion in share buybacks from 2023 to 2025. The value T-Mobile’s current market share is approximately $ 157 billion.
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But estimates in that regard were already in the Wall Street consensus figures. Shares of T-Mobile went from rising 1.9% Thursday afternoon to closing 1.1% as the event continued.
Execution of management over the next several years will be crucial, with the share price for success at roughly 48 times future earnings. Nonetheless, T-Mobile remains the most compelling growth story in the US wireless industry.
Write to Nicholas Jasinski at [email protected]