I have updated the data underlying my competitive telecom trends resource to include all available Q3 data for US-based competitive service providers. While the automatically generated charts are always there for you to peruse, I will take a closer look at each in turn with some better formatting as I did last quarter. First let's look at trends in EBITDA margin across the sector. We no longer have new data from RCN Metro (now Sidera Networks and privately held) but we do have enough partial data from Zayo to add in. Here's the chart:
As always, one must view the relative magnitude of each provider's EBITDA margin in light of the type of business it operates. Fiber-centric, high capex business models tend to be on the top, while services-centric, low capex business models tend to be lower. It's when lines cross that interesting things are happening, and in Q3 there was an interesting development down at the bottom of the chart.
Both XO Holdings (news, filings) and glbc saw margins surge above the 15% mark, and each is clearly trying to make a move toward greener pastures. XO had an especially steep rise but does tend to be volatile. Whether they fall back, hold steady, or continue expanding their margins will be interesting to watch. They have been an outlier for some time, having a great deal of metro fiber and spending quite a bit of capex despite having the lowest margins in the game. The move is less dramatic perhaps for Global Crossing, which has been looking to break through for a while now but still lacks metro fiber in the USA and hence isn't quite as far from where it should be based on its assets. Four providers are now clustered at 15-16%, with PAETEC (news, filings) fading a bit into the bottom slot ahead of its purchase of Cavalier.
And in orange, we now see Zayo's trajectory since the start of 2009, which has also been crossing lines. Zayo of course has evolved through M&A as well as organically, so their product mix has changed more rapidly over time and thus so has their position within the sector. But it is quite interesting to see them moving past TW Telecom (NASDAQ:TWTC, news, filings) and upward toward abvt at the top of the chart, especially since following the close of the AFS deal they will probably rise further.
For the field as a whole, margins generally continued to improve slightly.