Financial Trends for Network Operators in Q1

May 27th, 2014 by · 2 Comments

I have updated the competitive telecom trends graphs with the data from Q1 and the stock price movements since.  There are a few interesting highlights worth zeroing in on.  The charts below are snapshots, you can play with the interactive data on the main competitive telecom trends page.

TRImage_172 May. 27 Relative Valuation, i.e. EV/EBITDA -- While Level 3's stock price has been having a bit of a party lately, moving solidly over the $40 level and making its long-suffering investors happier than they've been in a while, the company's relative valuation hasn't actually jumped that much.  At just under 10x EBITDA, the company has at most won back some of the premium it used to have a few years back based on the underlying assets.  Cogent and tw telecom each still get more credit for their EBITDA at the moment, and I have no idea how Cogent's EV/EBITDA stays way up above 15 so effortlessly.  Meanwhile, Birch's purchase of Cbeyond brought Cbeyond's valuation only back to the bottom of this list, into a dead heat with Earthlink.
TRImage_171 May. 27 Adjusted EBITDA Margins: Only one thing of note happened on this front that wasn't noise or a steady trend.  Yes, I'm wondering what happened over at Sprint Wireline?  I had noticed the number when it came out, but it hadn't really registered.  Was it just a blip?  Or did they finally reach the point where revenue declines ran up against fixed costs?  They didn't really spend much time talking about it.
TRImage_173 May. 27 Relative Revenue Growth:  I have been trying to make this graph visually informative for a while, but it has been hard.  The relative scales of organic and inorganic changes have been so different, too often you only see M&A.  But I think I have the formula now, taking things relative to 4-5 quarters back.  In the graph to the left, we see the two halves of one recent M&A event (Inteliquent/GTT) to the right of that date, and the historical bumps for Zayo/AboveNet, LVLT/GLBC, and euNetworks/LambdaNet.  But we can also see the long term organic trends with Sprint, Broadview, and EarthLink declining briskly, Integra holding pretty steady, and the rest of the field (mostly fiber-heavy operators) ascending slowly.  Zayo's recent European M&As won't show up here until next quarter.

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Categories: CLEC · Fiber Networks · Financials · Metro fiber

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