AT&T, Verizon, Sprint, T-Mobile USA: Who is the Richest of Them All?

By Haig Sarkissian – Wireless 20/20

The wealth of companies is often measured by such financial metrics as market cap, revenue or EBITDA. Financial executives seem to have had no shortage of metrics to measure how successful a company has been in creating shareholder value. They often use MVA (Market Values Added), which measures the amount of wealth a company has created since its inception.

MVA is an extension of EVA (Economic Value Added), a metric that measures profitability and became popular in the 1990s. EVA in turn is calculated as: (Rate-of-Return minus Cost-of-Capital) times Economic Capital Employed.

In the wireless telecom business, marketing executives use market share gains or number of subscribers, net adds, churn and ARPU (average revenue per user) in order to identify the strongest, most innovative and fastest growing companies. Using market share figures, the US wireless telecom players will rank as follows according to Strategy Analytics as of 1Q2013.

As a wireless telecom analyst, I often try to identify the players who are best positioned to gain market share by identifying disruptions in the market and determining which players have the assets and competencies that position them to capitalize on these shifts.

We all have heard about the exponential growth in the demand for mobile data. One of the most important assets that position MNOís to meet this demand is spectrum.

Spectrum is used to build networks, and as the US carriers build their LTE networks, the 700 MHz spectrum has been used by AT&T and Verizon to quickly provide vast coverage, since the 700 MHz spectrum propagates far. Both Sprint and T-Mobile lack 700 MHz spectrum assets and are lagging in their LTE network deployments. But LTE coverage is only the initial challenge, as the larger challenge will be to provide capacity to meet the demand for growing data consumption.

Below is a view of the spectrum assets of the top four MNOís in the US as of December 2012, prior to the recent consolidations:

The picture shows that on an absolute basis, AT&T and Verizon had significantly larger amounts of spectrum than Spring and T-Mobile, and on a MHz/subscriber level, the former top two players were at a level playing field.

Recent Mergers and Acquisitions:
In the last 12 months, several significant mergers, acquisitions and spectrum swaps took place, which repositioned the spectrum ownership of the top four players. Verizon completed its acquisition of the SpectrumCo AWS licenses that positions it to deploy LTE in the AWS band. AT&T is in the process of acquiring Leap, which will enhance its spectrum position in some markets. T-Mobile and Metro PCS merged to create a stronger number four player. And most importantly, Sprint completed its acquisition of Clearwire, which significantly enhanced its spectrum holdings. Here is a view the spectrum assets of the top four MNOís in the USA after the recent changes:

On an absolute basis, Sprint ended up with the highest amount of spectrum at more than 200 MHz in the top US markets. This is twice as much as the spectrum assets of AT&T and Verizon. But considering that the number of subscribers on the Sprint network is significantly lower than that of its number 1 and 2 rivals, Sprintís spectrum assets per subscriber stands at 3.75 Hz/sub as compared to 1 Hz/sub for its top competitors. This implies that if Sprint is able to capitalize on its vast competitive advantage measured by Hz/sub, it should be able to offer significantly more data for each of its subscribers.
One added benefit of deploying LTE networks on larger spectrum bands is its ability to support higher bit rates. Sprint can use 40 MHz channels to offer significantly faster download experience to its subscribers. This will surely entice users who have a need for faster speeds.

Another added benefit of deploying networks using large spectrum bands is the significant cost savings to deliver bits/km squared. Using the WiROI Tool, we have shown that the number of cell sites will be reduced and the number of subscribers supported per cell will increase. This will in turn result in lower TCO (Total Cost of Ownership), and the cost per bit deployed can be reduced by up to 20 percent.

From the quick analysis above, it is obvious that AT&T and Verizon are currently the richest MNOs in the US by most financial metrics. But looking forward 5 years, as capacity becomes the key differentiator of MNOís in the US, Sprint is better positioned to offer higher bitrates and more tonnage to its subscribers. Armed with the cash from Softbank and with the ability to deploy a world class LTE network on its spectrum assets, we will wait and see how Sprint will address its short-term LTE coverage challenge, and whether it will be able to regain market share.

About the Author
Haig Sarkissian is the Principal Consultant for Wireless 20/20. Mr. Sarkissian brings 25 years of experience in the telecommunications industry with focus on the wireless communication markets. As a consultant he advises leading 3G/4G service providers and OEMs on strategy, target market definition, technology assessment & selections, as well as partnership development and investments. His clients span from start-ups to Fortune 100 companies. Prior to his consulting career, Sarkissian was VP of Sales and Marketing at Data Race and held senior management positions at AT&T. He holds a BSEE from Pratt Institute and an MSEE from Polytechnic University.

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