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Verizon Continues to Outpace the Wireless Carriers

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Tuesday morning, wireless giant Verizon (click ticker for report: ) reported decent fourth quarter results. Verizon’s revenue during the fourth quarter was slightly better than consensus estimates, growing 5.7% year-over-year to $30 billion. Earnings, adjusted for special items including a $1.55 per share pension charge, fell 27% year-over-year to $0.38 per share, which was worse than anticipated, even after netting out a $0.07 per share impact attributable to Hurricane Sandy. Verizon’s wireless segment led the way, with service revenues jumping 8.5% year-over-year, to $16 billion, and total segment sales growing 9.5% year-over-year, to $20 billion. Customers continue to migrate to smartphone plans which carry higher prices and superior margins. Retail postpaid ARPA (average revenue per account) jumped 6.6% compared to the … Read more

Sprint/Clearwire Deal Closes at $2.97 Per Share

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Wireless provider Sprint (click ticker for report: ) will acquire Clearwire (click ticker for report: ) for $2.97 per share, pegging the company’s enterprise value at $10 billion. The deal also includes bridge financing of $800 million, and as wtih the SoftBank deal, it is expected to close mid-2013. Last week, Sprint offered $2.90 per share for the company, and shares spiked to well over $3. We’ve seen several large minority shareholders voice concerns about the relatively low valuation the deal gives the company based on its net asset value, which appears to be a valid concern given the recent deals for spectrum. However, the previous connection (Sprint owns over 50% of Clearwire) between the two companies has put Clearwire … Read more

Wireless Industry Consolidation Continues

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According to The Wall Street Journal, Sprint (click ticker for report: ) will acquire spectrum and wireless operations from Midwest-provider US Cellular (USM) for approximately $480 million. Sprint will acquire key markets, including Chicago and St. Louis, and the deal includes approximately 585,000 customers. We don’t see any material impact on our fair value estimate for Sprint. The deal isn’t incredibly material for Sprint, but we think it certainly acquired these assets on the cheap. US Cellular has struggled to maintain market share in large markets due to the competition from larger providers with stronger smartphone offerings. We believe giving existing US Cellular customers the option of the iPhone, as well as other high-end Android phones, will help reduce churn. … Read more

AT&T Continues to Be a Cash Machine But Dividend Cushion Still Not Robust

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Telecommunications provider AT&T (click ticker for report: ) reported decent third quarter results Wednesday morning. Revenue was flat year-over-year at $31.5 billion, slightly shy of consensus estimates. Adjusted earnings per share grew 5% year-over-year to $0.62, which was a few pennies better than consensus expectations. Highlights of the quarter included free cash flow, a record $6.5 billion, and share repurchases, which totaled $3.8 billion. Wireless revenues grew 6.5%, driven by ARPU growth of 2.4% as consumers flock to smartphones, particularly the iPhone (click ticker for report: ) which accounted for 77% of smartphone activations (4.7 million units). Though smartphone activations were strong, net postpaid subscriber adds totaled just 151 thousand—well short of the consensus estimate calling for upward of 350 … Read more