Telcos of the US
The yawning gap between the top telcos in the US and their challengers: The case for consolidation
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Written at a pivotal moment for the US telecoms industry, this report compares the progress of AT&T, Verizon, Sprint and T-Mobile US over the past seven years on a range of financial metrics. While AT&T and Verizon are massive companies in their own right, Sprint and T-Mobile US are controlled by major overseas groups - SoftBank of Japan and Deutsche Telekom respectively.
With the laissez-faire Trump administration, the US telecoms market may finally consolidate from four main players to three. Although intense competition seems to be good for consumers, at least in the short term, the aggressive campaign to win market share by T-Mobile US has weakened the profitability of AT&T and Verizon, while causing more pain for long-suffering Sprint.
Having already acquired DirecTV, AT&T is looking to merge with Time Warner as it seeks to become a vertically-integrated provider of consumer entertainment. Verizon is also pushing into content and advertising, albeit through smaller acquisitions, such as the ongoing purchase of parts of Yahoo!, and in-house development.
After exploring the financial implications of the gap in scale between AT&T and Verizon and the two challengers, this report concludes by considering their relative return on capital employed (ROCE). It considers whether the ROCE generated by each of the US’s four telcos makes them unattractive to investors, jeopardising both their future and the deployment of next generation broadband infrastructure.