Revenues, Margins, and Capex for Competitive Network Operators

December 1st, 2011 by · Leave a Comment

On Monday I posted the my updated relative valuations chart for Q3, and here is the followup with a look at the rest of the data showing the latest trends in Revenue Growth, EBITDA Margin, and Capex as a percentage of revenue.

For revenue growth, I have changed the representation of the data by moving the reference date to 1/1/2010 instead of 1/1/2008. This helps to emphasize more recent changes and also lets me include Zayo, for whom I didn’t have 2008 data:

Relative Revenue Growth for Competitive Network Operators


Obviously the wildest movements come from M&A, with Zayo and lately PAETEC.  This is not an organic growth chart but an overall one – I have tried to isolate organic growth rates but the data is too inconsistent and hard to both gather and present.  Nevertheless, remembering the various M&A events enables us to pick out the underlying organic trends.  Sprint’s sustained revenue decline is obvious, but over the past several years Broadview has been on a similar trend. The rest of the field saw growth, with AboveNet and Cogent leading the pack and Level 3 trailing but now clearly on upward trend again.

EBITDA margin trends have remained largely intact, with the fiber-light CLEC business model generally finding sub-20% margins and a greater fiber focus yielding higher levels:

Adjusted EBITDA Margin for Competitive Network Operators


Zayo’s integration of the AGL and AFS dark fiber businesses has boosted them to the top of the heap, still edging out AboveNet. Earthlink shows up for the first time in the mid 20% range, higher than the CLEC assets they bought due to their declining but still profitable access business. Broadview joins the metro-fiber-light sub-20% group, which makes sense. And Sprint, which maintained its margins in 2010 has spent the last three quarters reeling as revenues churn off faster than they can cut costs.

Finally, relative capex trends are always a bit more choppy but give us a good sense of who is plowing money back into their asset base:

Relative Capex Trends for Competitive Network Operators


Newcomers Broadview and Earthlink both check in with capex levels below 10%, reflecting similar asset types. Interestingly, tw telecom’s surge in on-net building additions hasn’t been accompanied by a particularly large shift in their relative capex levels – they’re up but still well below those of Zayo and AboveNet who are more actively building new fiber rings and such than adding enterprises to existing ones.

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Categories: CLEC · Financials · Metro fiber

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