Carrier Scorecard: Ma Bell's Metamorphosis
Once again, it's scorecard time for the nation's largest wireline carriers.
Light Reading will, each quarter, publish scorecards on the world's most influential, publicly held carriers, giving them a grade of A through F based on their financial and business performance. Our previous North American carrier scorecard is right here: Carrier Scorecard: Impressed With Qwest?
As ever, format dictates that we provide the carrier the grade we've assigned it, a write-up of how we arrived at that grade, and a table containing all the raw data that was used.
Receiving a grade of A is damn near impossible, as you need to show double-digit growth across the board and obvious momentum for the future. Meanwhile a grade of B+ is grounds for alerting the media (and your next of kin).
Without further ado, here are the scorecards for the first quarter of 2007:
Verizon: B At first glance, it was an odd quarter for Verizon Communications Inc. (NYSE: VZ). Net income was off by 8.4 percent and EPS was down 8.9 percent. But Verizon's still the telco to beat in just about all areas. Revenues are up. Broadband subs are up 30 percent over the comparable quarter last year. And video subs are up more than 100 percent.
As usual, we credit Verizon for spending nearly one fifth of its market cap to deploy its fiber-fed FiOS network. Our concern? Well, Verizon's financial strength will be tested soon enough, as it will have to do some serious price-cutting for the company to really take a substantial amount of market share from cable and satellite TV services.
The carrier still gets most of its revenues from a dying business -- its traditional phone service. The jump in broadband subscribers and video subs will help offset that decline, which is good. Wireless growth will offset the enormous expense of maintaining and adding to its network there, though the competition in wireless is a lot more heated.
Table 1: Verizon's Q1 2007 Scorecard
AT&T: B- It's tough to know what to make of AT&T Inc. (NYSE: T)'s first quarter of 2007. It was the first quarter that numbers from BellSouth and Cingular were included in its reports, and its numbers nearly doubled across the board after swallowing another large company. Is this caterpiller going to be a butterfly or just a big fat slug?
Here's AT&T's m.o. from our vantage point: The wireline segment is all about cutting costs and treading water. Meanwhile, the wireless segment is all about rapid growth and investment. The carrier did have a solid 20 percent growth in EPS, and it is, by all accounts, trimming expenses, even while the rich get richer.
Our concerns for AT&T long-term are numerous. Coming up, we'll be delving into why the company's change in plans with U-verse, though not reflected in this quarter's numbers, made the deployment of the service suddenly more expensive and less expansive. (See AT&T Lowers U-verse Goals Again.)
Table 2: AT&T's Q1 2007 Scorecard
Qwest: B+ Once again, Qwest Communications International Inc. (NYSE: Q)'s profits skyrocketed because its mother took away its allowance. How else do you explain earnings nearly tripling with revenues staying flat?
Qwest saw more strong growth in broadband subs this quarter -- an encouraging sign. Its video subscriptions were way up, too, which is a good thing, given that revenues were off and access lines continue to erode.
Speaking of video, the company has little to show for its video strategy outside of a nearly total reliance on DirecTV Group Inc. (NYSE: DTV). But given its financial situation overall, that's a prudent choice. As it goes to embrace other video efforts in the future, you can bet the company's accountants are careful not to let Qwest outrun its talent, as they say in Nascar. (See Qwest's Quest for Video .)
The bright spot for Qwest in the near-term will likely come from the company's share of the Networx Universal contract. Having a government contract as your bright spot doesn't exactly scream fun and games, but that's the bed the company's managers made way back when. If you want Casual Fridays and Foosball tables, go work at Google. (See Networx Numbers Big for VZ, AT&T, Qwest.)
Table 3: Qwest's Q1 2007 Scorecard
Bell Canada: B BCE Inc. (Bell Canada) (NYSE/Toronto: BCE)'s first-quarter scorecard is keeping the company comfortably above C-level. EPS and earnings were both strong, and the Canadians still have more video subs than any other North American carrier -- better to watch all that hockey with, my dear. Our concern is that the carrier might drop off our roster soon. It's no longer a secret that it is entertaining the idea of attending private school, with several Canadian pension funds and New York-based Kohlberg Kravis Roberts & Co. (KKR) footing the bill. Maybe then, safe from the glare of Wall Street's spotlight, it can focus on aggressively remaking its network and just generally being less boring.
Table 4: Bell Canada's Q1 2007 Scorecard
— Raymond McConville, Reporter, Light Reading
Light Reading will, each quarter, publish scorecards on the world's most influential, publicly held carriers, giving them a grade of A through F based on their financial and business performance. Our previous North American carrier scorecard is right here: Carrier Scorecard: Impressed With Qwest?
As ever, format dictates that we provide the carrier the grade we've assigned it, a write-up of how we arrived at that grade, and a table containing all the raw data that was used.
Receiving a grade of A is damn near impossible, as you need to show double-digit growth across the board and obvious momentum for the future. Meanwhile a grade of B+ is grounds for alerting the media (and your next of kin).
Without further ado, here are the scorecards for the first quarter of 2007:
Verizon: B At first glance, it was an odd quarter for Verizon Communications Inc. (NYSE: VZ). Net income was off by 8.4 percent and EPS was down 8.9 percent. But Verizon's still the telco to beat in just about all areas. Revenues are up. Broadband subs are up 30 percent over the comparable quarter last year. And video subs are up more than 100 percent.
As usual, we credit Verizon for spending nearly one fifth of its market cap to deploy its fiber-fed FiOS network. Our concern? Well, Verizon's financial strength will be tested soon enough, as it will have to do some serious price-cutting for the company to really take a substantial amount of market share from cable and satellite TV services.
The carrier still gets most of its revenues from a dying business -- its traditional phone service. The jump in broadband subscribers and video subs will help offset that decline, which is good. Wireless growth will offset the enormous expense of maintaining and adding to its network there, though the competition in wireless is a lot more heated.
Table 1: Verizon's Q1 2007 Scorecard
| 1Q07 | 1Q06 | Q/Q Change | 2Q07* | 2Q06 | Q/Q Change | |
| Revenue (Millions) | $22,584 | $21,231 | +6.4% | $22,993 | $23,207 | -0.9% |
| Earnings (Millions) | $1,495 | $1,632 | -8.4% | $1,668 | $1,661 | +0.4% |
| GAAP EPS | $0.51 | $0.56 | -8.9% | $0.58 | $0.55 | +5.5% |
| Access Lines | 45,100,000 | 48,545,000 | -7.1% | |||
| Broadband Subscribers | 7,400,000 | 5,700,000 | +29.8% | |||
| Video Subscribers** | 988,000 | 415,000 | +138.1% | |||
| *Projected (data provided by Reuters Estimates) **348,000 FiOS TV subscribers and 618,000 DirecTV subscribers in 2007 | ||||||
AT&T: B- It's tough to know what to make of AT&T Inc. (NYSE: T)'s first quarter of 2007. It was the first quarter that numbers from BellSouth and Cingular were included in its reports, and its numbers nearly doubled across the board after swallowing another large company. Is this caterpiller going to be a butterfly or just a big fat slug?
Here's AT&T's m.o. from our vantage point: The wireline segment is all about cutting costs and treading water. Meanwhile, the wireless segment is all about rapid growth and investment. The carrier did have a solid 20 percent growth in EPS, and it is, by all accounts, trimming expenses, even while the rich get richer.
Our concerns for AT&T long-term are numerous. Coming up, we'll be delving into why the company's change in plans with U-verse, though not reflected in this quarter's numbers, made the deployment of the service suddenly more expensive and less expansive. (See AT&T Lowers U-verse Goals Again.)
Table 2: AT&T's Q1 2007 Scorecard
| 1Q07 | 1Q06 | Q/Q Growth | 2Q07* | 2Q06 | Q/Q Growth | |
| Revenue (Millions) | $28,969 | $15,756 | 83.9% | $29,631 | $15,810 | 87.42% |
| Earnings (Millions) | $2,848 | $1,445 | 97.1% | $2,861 | $1,808 | 58.23% |
| GAAP EPS | $0.45 | $0.37 | 21.6% | $0.48 | $0.46 | 4.35% |
| Access Lines | 32,357,000 | 22,630,000 | 43.0% | |||
| Broadband Subscribers | 10,908,000 | 6,264,000 | 74.1% | |||
| Video Subscribers** | 1,697,000 | 549,000 | 209.1% | |||
| *Projected (data provided by Reuters Estimates) ** In 2007, 13,000 are U-Verse subscribers and 1,684,000 are Dish Network subscribers sold through AT&T. In 2006, all video subsribers are Dish Network | ||||||
Qwest: B+ Once again, Qwest Communications International Inc. (NYSE: Q)'s profits skyrocketed because its mother took away its allowance. How else do you explain earnings nearly tripling with revenues staying flat?
Qwest saw more strong growth in broadband subs this quarter -- an encouraging sign. Its video subscriptions were way up, too, which is a good thing, given that revenues were off and access lines continue to erode.
Speaking of video, the company has little to show for its video strategy outside of a nearly total reliance on DirecTV Group Inc. (NYSE: DTV). But given its financial situation overall, that's a prudent choice. As it goes to embrace other video efforts in the future, you can bet the company's accountants are careful not to let Qwest outrun its talent, as they say in Nascar. (See Qwest's Quest for Video .)
The bright spot for Qwest in the near-term will likely come from the company's share of the Networx Universal contract. Having a government contract as your bright spot doesn't exactly scream fun and games, but that's the bed the company's managers made way back when. If you want Casual Fridays and Foosball tables, go work at Google. (See Networx Numbers Big for VZ, AT&T, Qwest.)
Table 3: Qwest's Q1 2007 Scorecard
| 1Q07 | 1Q06 | Q/Q Change | 2Q07* | 2Q06 | Q/Q Change | |
| Revenue (Millions) | $3,446 | $3,476 | -0.86% | $3,465 | $3,472 | -0.20% |
| Earnings (Millions) | $240 | $88 | +172.73% | $262 | $117 | +123.93% |
| GAAP EPS | $0.12 | $0.50 | +76.00% | $0.17 | $0.06 | +183.33% |
| Access Lines | 13,551 | 14,546 | -6.84% | |||
| Broadband Subscribers | 2,305,000 | 1,678,000 | +37.37% | |||
| Video Subscribers | 506,000 | 219,000 | +131.05% | |||
| *Projected (data provided by Reuters Estimates) | ||||||
Bell Canada: B BCE Inc. (Bell Canada) (NYSE/Toronto: BCE)'s first-quarter scorecard is keeping the company comfortably above C-level. EPS and earnings were both strong, and the Canadians still have more video subs than any other North American carrier -- better to watch all that hockey with, my dear. Our concern is that the carrier might drop off our roster soon. It's no longer a secret that it is entertaining the idea of attending private school, with several Canadian pension funds and New York-based Kohlberg Kravis Roberts & Co. (KKR) footing the bill. Maybe then, safe from the glare of Wall Street's spotlight, it can focus on aggressively remaking its network and just generally being less boring.
Table 4: Bell Canada's Q1 2007 Scorecard
| 1Q07 | 1Q06 | Q/Q Change | 2Q07* | 2Q06 | Q/Q Change | |
| Revenue (Millions - CAD) | $4,385 | $4,343 | +0.97% | $4,439 | $4,803 | -7.58% |
| Earnings (Millions - CAD) | $529 | $494 | +7.09% | $494 | $374 | +32.09% |
| GAAP EPS | $0.62 | $0.52 | +19.23% | $0.47 | $0.53 | -11.32% |
| Access Lines | 8,638,000 | 9,075,000 | -4.82% | |||
| Broadband Subscribers | 1,941,000 | 1,760,000 | +10.28% | |||
| Video Subscribers | 1,824,000 | 1,739,000 | +4.89% | |||
| *Projected (data provided by Reuters Estimates) | ||||||
— Raymond McConville, Reporter, Light Reading
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