Paying for Privacy: A New Trend?February 23, 2015
The FCC Approves Net Neutrality RulesMarch 2, 2015
2014 Q4 Carrier Earnings Analysis
Carrier reports by Cannon Group
As part of our ongoing vendor knowledge process, Cannon Group reviews Q4 earnings in 2014 for AT&T, Sprint, T-Mobile and Verizon.
We use this information to get a macro view of carrier financial health. In addition, when working and negotiating on behalf of our clients, it helps us to understand the carriers’ positioning, as well as the pressures that both carrier and account teams face with regards to margins and revenue.
|Total Revenue ($mm)
(Up from 32,957)
(Up from 8,488)
(Up from 7,350)
(Up from 31,586)
(Dn from 14,615)
(Dn from 708)
(Dn from 9,576)
(Dn from 15,423)
(Dn from 6,890)
(Up from 5,684)
(Dn from 18,356)
(Dn from 2,604)
(Dn from 74)
(Up from 1,464)
(Dn from 2,636)
(Up from 1,354)
(Up from 1,131)
(Up from 2,483)
|*Based on reports by Morgan Stanley
A few highlights from the earnings reports:
- With the wireless industry becoming increasingly more competitive, AT&T’s wireline businesses is facing pressures such as wireless substitution and cable competition.
- Speaking of wireline, data and video net adds were lower than expected as DSL migration to U-Verse starts to slow, and the company pulled back on marketing before the DirecTV acquisition.
- While AT&T / DirecTV may be approved, there is some regulatory risk, with the shot clock set to expire on March 23.
- For more on U-Verse and the new privacy option it will offer, see Paying for Privacy: A New Trend?
- As of Q4, AT&T still has the second best LTE coverage, with ~300M (compare this to wireless network coverage in 2014).
- FCC Chairman Tom Wheeler plans to propose rules for net neutrality on February 5, ahead of a vote on February 26. For the latest on net neutrality, see How FCC Regulations Could Change the Internet.
- Financial results for Sprint were better than expected, especially considering that in the 3Q14 carrier reports, Morgan Stanley experts predicted that top line deterioration would persist “for some time.”
- Despite these promising results, Morgan Stanley also reports that consolidated Adj. EBITDA margins fell on a combination of a total revenue decline of 1.8% Y/Y and higher opex (likely due to sub acquisition/retention costs).
- As far as LTE goes, Sprint’s progress in 2014 (see Sprint Collaborates with Rural Carriers to Expand LTE and Sprint is Making Moves to Expand its LTE Network) is positive overall. Currently, Sprint covers 270M POPs with 4G / LTE with 125M POPs covered by the 2.5 GHz deployment (tri-band network).
- Continuing its recent trend of strong operational performance, T-Mobile finished strong in 2014 with 1.276m branded postpaid net adds in Q4. In addition, the UnCarrier delivered a fourth straight quarter of positive service revenue growth. According to Morgan Stanley, these results were above expectations, and the UnCarrier’s Adj. EBITDA performance was “the standout supported by strong top line and subscriber growth momentum.”
- Regarding LTE, T-Mobile has made leaps and bounds (see T-Mobile is Next in Line to Expand LTE), with its 4G/LTE coverage reaching 265M POPs – and is headed to 300M by the end of 2015, with the MetroPCS and 700 integration progressing well and ahead of expectations.
- It remains to be seen how T-Mobile’s new WiFi equipment offering will affect revenues (see T-Mobile Offers Free WiFi Equipment to Improve Network Performance).
- Q4 results were pressured and less than expected financially, but Verizon also achieved better results from wireless equipment revenues and wireline margins.
- Verizon remains the best-positioned company in this competitive wireless industry, with “an attractive portfolio of spectrum, and LTE covering 308M POPs.
- Last quarter, the Verizon Edge program had a 12 percent take rate. For 2015, management expects Edge take rates between 34 percent and 35 percent in 2015.
- Verizon recently announced plans to offer WiFi calling in 2015 (aka Voice-over-WiFi, or VoWiFi) to complement other services, such as its existing 3G voice services and promising VoLTE networks, rather than filling any performance holes in their networks (see AT&T and Verizon Will Offer WiFi Calling in 2015).
Download the full Morgan Stanley reports below:
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