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Workers are rebuilding a cell tower with 5G equipment for the Verizon network.
George Frey / Getty Images
Last week, investors spent eight hours combined listening to telecommunications executives, with investors days
Verizon Communications,
T-Mobile USA,
i
AT&T
from Wednesday to Friday. Management teams set out their plans to obtain newly acquired wireless spectrum licenses and published their strategies for the 5G era.
AT&T’s depressed shares (ticker: T) were the main winners in investor day, but for reasons unrelated to its core wireless business.
Verizon
(VZ) i
T-Mobile
(TMUS), meanwhile, stuck to its proven messages: “Network, network, network” for Verizon and “Leave competitors in the dust” for T-Mobile.
Verizon was the main investor in the recently completed C-band auction, pledging $ 53 billion in spectrum licenses and associated compensation costs. Management turned this Wednesday evening into the centerpiece of its field Expect to invest $ 10 billion to upgrade its network equipment to manage this spectrum, in addition to an existing annual capital spending budget of about 18,000 million dollars.
Verizon sees its investments in 5G will pay off in a few years. He said he expects to increase his revenue from services by at least 2% in 2021, at least 3% in 2022 and 2023, and at least 4% in 2024 and beyond.
That’s not much, but it’s a decent clip for Verizon. In a saturated wireless market in the United States, management focuses on moving customers to unlimited premium plans. He also pointed to new 5G monetization opportunities, such as state-of-the-art computing for businesses and a wireless home broadband product, which he estimates will cover 50 million homes by 2025. Verizon stocks fell a notch. 2.8% after your event.
The highlight of AT&T’s presentation Friday morning was not related to telecommunications. The company unveiled a significantly higher subscriber target for HBO Max and HBO, and management detailed plans for a level of advertising and international releases. Other guidelines and comments largely reiterated the above observations.
That transmission approach seemed to be enough, and AT&T shares rose 0.9% on Friday. Now, the company expects to have up to 150 million streaming subscribers by 2025, compared to its previous forecast (by the end of 2019) of up to 90 million.
The market has recently valued streaming services based on multiple revenue and subscriber growth, much unlike AT&T’s slow-growing, capital-intensive telecommunications companies.
Netflix
(NFLX) has long been trading predominantly in the number of subscribers, while ambitious targets of
ViacomCBS
(VIAC) i
Discovery
(DISCA) have recently shipped these stocks on the rise. But AT&T may not get as much credit given its conglomerate structure.
AT&T and Verizon remain attractive to value investors, those of Warren Buffett
Berkshire Hathaway
(BRK.B) recently participated in the latter, and neither management team did much to change that. Trading futures profits approximately nine and eleven times, respectively, and with high annual dividend yields of 7% and 4.4%, they certainly seem attractive in relation to the market. But there is much more growth elsewhere.
Arriving about a year after Sprint’s acquisition, T-Mobile’s event on Thursday afternoon focused on the company’s progress in integrating its former rival. T-Mobile’s management has not been shy with its ambitions to gain market share in the rural and suburban areas of the United States and with business customers (where today it lags behind AT&T and Verizon) and to suggest that the merger will generate even greater profits than when it was first proposed in 2018. Wall Street expected a revised synergy and free cash flow targets.
T-Mobile delivered, raising its annual merger-related cost savings estimate by 25%, to $ 7.5 billion, and said its integration was a year ahead of schedule. The company now sees about $ 65 billion in free accumulated cash flows through 2025, 20% more than before, opening the door to a $ 60 billion share repurchase potential from 2023 to 2025. T-Mobile’s current market value is about $ 157 billion.
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But estimates along these lines were already in the Wall Street consensus numbers. Shares of T-Mobile rose 1.9% on Thursday afternoon to close 1.1% as the event continued.
The execution of management over the next few years will be crucial, as the shares will be approximately 48 times more successful in the long term. Still, T-Mobile remains the most compelling growth story for the U.S. wireless industry.
Write to Nicholas Jasinski to [email protected]