SBC already the largest Telecom in US

[David Farber <dave () farber net>]

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Subject:        SBC already the largest Telecom in US
Author: Daniel Berninger <dan () danielberninger com>
Date:           31st January 2005 7:03:31 am

Dave,

For IP if of interest.

SBC's deal acquiring AT&T's (http://sbc.merger-news.com) will be getting
lots of coverage, but everyone seems to have missed the fact that SBC is
already the largest carrier in the US - not Verizon.

An apples-to-apples comparison in Q404 reveals SBC as the biggest US carrier
even though the market grants Verizon a 25% premium over SBC.

Confusion about the relative size of Verizon and SBC arises because Verizon
reports 100% of Verizon Wireless revenues as a part of the parent company's
revenues.  Verizon addresses the fact of Vodafone's 45% stake as a minority
interest expense further down on the income statement.  SBC reports 0% of
Cingular's revenues as a part of the part company's revenues.  It addresses
the fact of its 60% stake in Cingular as "other income" further down on the
income statement.  Verizon boosts its top line by the full $27bn of Verizon
wireless's revenue even though Verizon only owns 55% of Verizon Wireless.
SBC's top line revenue number reflects only the wireline operating units.

The two companies have roughly the same number of access lines (SBC 52mn,
Verizon 53mn).  SBC has proportionally more wireless customers (60% of 49mn)
than Verizon (55% of 44mn.)  SBC has more LD customers (20.9mn versus
17.7mn), more DSL customers (5.1mn versus 3.6mn), and greater data revenue
($11bn verus 8bn).  Both companies have similar total debt (SBC 42bn versus
Verizon 40bn), but SBC has a significantly smaller Deferred Tax Liability
($15.5bn versus 22.5bn.)

SBC's acquisition of AT&T will boost its revenue even further, but you can
expect Verizon to get back into the game by acquiring Sprint.

Best regards,

Dan

........................................................
Daniel Berninger
VP, Senior Analyst
Tier1 Research
v: 202.250.3838
e: dan () tier1research com
w: www.tier1research.com




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