According to the Cellular Telecommunications & Internet Association (CTIA) there are approximately 180 wireless service providers in the United States. That’s a whole lot of choice for consumers, but not so much for investors. Of those 180 providers, the largest four control more than 90% of the market, 294.2 million out of the 321.7 million subscriptions reported by the CTIA. This article will focus on three out of those four, as the fourth, T-Mobile, is owned by German based Deutsche Telekom and therefore cannot be directly invested in without investing in the company as a whole.
The subscriber leader
According to its 2012 Q4 report, AT&T Inc. (NYSE:T) is the largest phone company in terms of subscribers, which totaled 107 million at year end. It is also the largest wireless provider in terms of market capitalization with $201 billion. Trailing twelve month price-earnings is not a very good metric to use when analyzing these companies, but for information purposes it is the best of the companies in this article at 29.3. But that’s enough of a technical analysis, now on to the real issues.
Last year AT&T Inc. (NYSE:T) had revenue of $127.4 billion and earnings per share of $1.25. The company purchased 6%, or 371 million, of its outstanding shares in 2012, enabling it to save $700 million in annualized dividend payments. Speaking of dividends, the company is currently yielding 4.92% and has been increasing dividends steadily for 29 consecutive years. Revenue generated by the company’s wireless segment is growing quickly, especially pertaining to data revenue, which increased 14.7% over 2011 to $6.8 billion. This growth can probably be attributed to AT&T’s blazing fast LTE, which was ranked by a Root Metrics test in the second half of 2012 as the fastest pure LTE with an average download speed of 18.6 Megabits per second. The company has a very strong 2013 outlook with expected consolidated revenue growth of 2%. They also plan to authorize another share repurchase program which should help the stock price even more.
Most of AT&T’s revenue comes from its wireless segment
The geographic king
Verizon Communications Inc. (NYSE:VZ) states in its 2012 Q4 report that its 4G LTE network is available in 476 markets to over 273 million people, or 89% of the U.S. Population, making it the largest 4G LTE network in the country. Over 50% of data use by Verizon subscribers is on its 4G LTE network. This is due to the fact that in the fourth quarter alone, Verizon activated 9.8 million smartphones, accounting for 87% of postpaid phone activations in that time frame. Again, although price-earnings is not a very good metric to use with these companies, for information purposes, Verizon’s is currently 155.06.
The company reported earnings per share for the year of $0.31, down quite a bit from the previous year due to struggles with pensions in the fourth quarter that affected AT&T Inc. (NYSE:T)’s earnings as well. Aside from pension problems, Verizon Communications Inc. (NYSE:VZ) is growing faster than it has in the past four years, adding 5 million new postpaid customers in 2012, up 5.9% year over year. Of these 5 million new postpaid customers, 2.1 million were added in the fourth quarter, up 53.7% from the fourth quarter of 2011. Verizon is currently yielding 4.31% in dividends and does not have a share repurchase program at this time.
Verizon is clearly the leader in terms of coverage area