Now that nearly all the earnings results are posted for Q4/2013 for competitive network operators of all stripes, I have updated the eight competitive telecom trends graphs with the new data. The highlights include: a skyhigh valuation for Cogent even despite the recent pullback in the stock and all that Netflix/Comcast talk, rapid margin growth over at euNetworks, and a broad-based increase in capex as a percentage of revenue lately.
Right now though the most interesting trend to me is the continued steady convergence in the ratio of net debt to EBITDA. After a long period of being all over the map, everyone’s balance sheets seem to be following the same drummer. It doesn’t seem to matter what operational path is being taken, they’re all converging on a narrowing band between 2.5 and 4.5. The risk takers are getting more conservative, and the conservatives are taking more risks. If this trend holds the entire competitive network sector will have the same net debt to EBITDA ratio of about 3.5 in a few years.
Net Debt/EBITDA For Competitive Network Operators
Only Cbeyond and Inteliquent are outliers, as both have eschewed long term debt almost entirely. Of course, both are also outliers in business model relative to the others – with Inteliquent probably no even longer belonging in this group since selling its actual network. For its part, Cbeyond has more nextgen fiber and data than it used to, but they still have a lot less actual network than the rest. Cogent is a bit below the 2.5-4.5 range for now, but with the special dividends they’re issuing they will be catching up shortly.
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