EBITDA Margin Trends for Competitive Telecoms

March 24th, 2010 by · 7 Comments

Following up on yesterday's look at revenue trends over the past 8 quarters amongst competitive telecoms of all stripes, let's take a look at EBITDA margins.  EBITDA margins give us an idea of each business's ability to turn revenue into cash, but of course it doesn't account for cash spent on capital expenditures.  Thus, business models with a heavy fiber bias tend toward the top, while fiber-light business models tend toward the bottom.   With no further ado:


Business models don't change overnight, which means that lines on this graph don't cross too often.  But we can see that CBeyond's Q4 performance was actually pretty dramatic, hopefully they will manage to keep it up as they say they expect to.   Overall though, EBITDA margins in the sector didn't really do very much., at least not relative to 2008 when everyone was on the upswing.  A few went up slightly, a few went down slightly.   Perhaps after the recession the sector has squeezed all the operating efficiencies it can for now, or perhaps they are in some cases starting to spend in anticipation of a rebound.

Next up will be capex as a percent of revenue, which is the other half of this graph that is needed to understand this sector.

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Categories: CLEC · Financials · Metro fiber

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7 Comments So Far


  • Hi Rob –

    I have been looking for telecom trending graphs without much success and was very excited to find your revenue and EBITDA trending charts. They are extremely insightful and paint a very clear picture of what is going on in the industry.

    I hope this does not overstep in any way but I was wondering if you wouldn’t mind sharing the underlying data you gathered to create the charts.

    I completely understand if you don’t feel comfortable passing along as it is apparent you spent a lot of time gathering and creating the charts.

    Either way thanks for posting the trending graphs and hope to hear from you- thanks!

    Brandon

  • Dave Rusin says:

    There’s revenue and then there is revenue … margins tell the story of the quality of the revenue .. just because there is a big top line or top line growth … many have gone bankrupt focused on the top line. You can always grow top line by price competing until you can’t make it up in volume and die.

    Of a few companies I know that are privately held … our EBITDA margins would be at the top of this graph creating a sustainable future.

    Life is good.

  • Anonymous says:

    It’s not about revenue or ebitda, it’s about unlevered free cash flow (ebitda-capex). Margin alone is not going to do a thing if you have to spend a tremendous amount of capex to attain it. What kind of return is being generated from the assets being deployed?

    • Rob Powell says:

      That will be the subject of another chart. But unlevered free cash flow is also only part of the picture, as it neglects the difference between a business whose capex is directed at maintaining current business and one which is spending aggressively for expansion. Only by looking at these metrics in combination can we make useful comparisons – alone they are all very incomplete.

  • Anonymous says:

    Didn’t EBITDA die with the Telecom bust? Why does anyone care about EBITDA. It is a useless tool used by CLEC’s who have and never will turn a meaningful profit.

    • Rob Powell says:

      No, it’s still used extensively for valuation and comparison. One problem is that due to the previous bubble and the reset of depreciation timetables for so many assets, raw earnings numbers can’t easily be compared against each other. However, I think the days when EBITDA was the only measure are over, one must look at many factors which is why this is just one chart of a series.

      • Anonymous says:

        I know it is still being used extensively by the carriers and investors. However, it should have died because it is a useless measurement especially in todays landscape. It only seems to be touted by those who have never and probably never will earn any actual income. My post was in no way meant to offend you and your hard work. The information you provide is extremely insightful. I’m sure I speak for all of your readers when I say thank you for your hard work.

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