Last week I took a look at relative revenue trends amongst a wide range of competitive telecoms, but revenue is not the whole story. In this post, I update and add to an earlier study of adjusted EBITDA margin trends from back in May, including Q2 numbers, some missing data, and the results of Sprint Wireline and CBeyond. With no further ado, here is the updated chart across 6 quarters now:
It is much harder to pick out the recession in this graph than in the revenue graph. That is because of the aggressive cost cutting that has been going on by those seeing the most revenue pressure, and it has been generally successful across the sector in not just maintaining margins, but in continuing to expand them.
As usual, the companies whose businesses focus around their own fiber have the highest EBITDA margins (and also the highest capex): Abovenet, TW Telecom, RCN Metro, and Cogent. Level 3 fell back a bit this quarter mainly because of the higher revenue pressure they have seen. ITC Deltacom and Paetec have continued to hold margins steady with cost savings offsetting revenue pressure or better. And both Global Crossing and XO remain below 15%, but both managed a clear rebound in the second quarter. XO has a long way to go yet to catch the field, but Global Crossing just might be ready to change strata over the next few quarters.
Amongst the newcomers to this chart, Sprint has surged upwards on the strength of cost savings despite their steady revenue pressure. Looking at Sprint Wireline's clear upward margin trend is quite a change of pace of the usual look at its revenue leakage. CBeyond's margins seem to be on a steady downward trend. They own the least amount of fiber of the companies charted here, and one might attribute their margin declines to greater sensitivity to churn because of that. But I think some of it comes from their determination to keep expanding into new markets despite a tough pricing environment - definitely bold but not without its side effects.
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