Cable Tech

Carrier Scorecard: Euro-rific

First North America, then the world!

Well, that was our plan for these Carrier Scorecards and, so far, we're sticking to it. (See Carrier Scorecard: Impressed With Qwest?) In case you're just coming back around from a St. Patrick's Day blackout, our Carrier Scorecards are a way to size up the progress of the world's largest service providers throughout the year. As we analyze each company, we'll assign it a grade, A through F, as if it were still in school.

So sit up straight, everyone. Eyes forward. No talking...

Our criteria are rooted in hard numbers and squishy opinions: To get an A you must show double-digit growth in earnings, earnings per share (EPS), revenues, and broadband subscribers. You must have a vision and be working to make it real. A refined accent and winsome smile can only help.

Anything less than an A is nothing to be ashamed of. But double-digit shrinkage in all categories with a poorly articulated strategy is a recipe for disaster -- and a big fat F.

As we said before, these aren't scientific rankings, but they hopefully will help you put aside the hype and see how these carriers, challenged though they may be, are actually performing as companies.

What follows is our International Carrier Scorecard for wireline data carriers. The companies reviewed this time represent the U.K., France, Germany, Italy, and Spain.

As format dictates, we'll provide the carrier, the grade we've given them, a write-up on how we arrived at that grade, and a table so you can see all the hard data for yourself and come to your own conclusions.

A quick note on foreign carriers: We're reporting calendar quarters, not fiscal quarters. So Q4 2006 refers to the last three months of 2006, despite what the carriers themselves call the quarter. And for France Telecom, we gave up trying to break out its numbers and just went with the full reported year of 2006.

Without further ado, here are the scorecards:

BT: B The only carrier to dish out double digit growth in earnings and EPS, BT Group plc (NYSE: BT; London: BTA)'s fourth quarter continued a 19-quarter streak of earnings growth. BT only recently started rolling out its "BT Vision" video service, and subscriber numbers are not yet available. But BT's broadband subscriber growth outstripped its access-line loss by a good margin. And revenues, though almost flat, are still on the plus side of the ledger. In coming months, we'll be interested to see video subscriber numbers and to get wind of what BT's doing with its consulting and outsourcing acquisitions -- and we'll see how growth continues for its BT Broadband Talk and BT Softphone VOIP products. (See BT Reports Q3, BT Buys Indian Outsourcer, BT Buys INS, and BT Claims 1M VOIP Users.)

Table 1: British Telecom's Q4 2006 Scorecard
4Q06 4Q05 Q/Q Growth
Revenue (Millions) $9,994 $9,518 5.00%
Earnings (Millions) $1,246 $1,065 17.00%
GAAP EPS $0.11 $0.10 13.72%
Access Lines 21,119,000 23,095,000 -8.56%
Broadband Subscribers 11,898,000 9,488,000 25.40%
Video Subscribers* n/a n/a n/a
*BT has not yet announced any subscriber data for its video service

Deutsche Telekom: D Deutsche Telekom AG (NYSE: DT) had a strong 2006 overall but fell on its Kopf in the fourth quarter. Earnings and EPS were off by a mile, but revenues were still up (barely) as the carrier saw big gains in broadband subscribers. There's no video subscriber data yet, so it's difficult to know how well the carrier's strategy is working there. If its broadband performance weren't so stellar, we'd be tempted to fail DT this time around. That said, we're encouraged by what we see so far in 2007 as the carrier is shedding unsuccessful businesses, concentrating on broadband, and pledging to net 1.5 million IPTV customers by 2010. We'll see how they do. (See DT Outlines Strategy, Carrier Scorecard: T-Mobile, DT Plans Strategy Revamp, and Deutsche Telekom Cancels FMC Service.)

Table 2: Deutsche Telekom's Q4 2006 Scorecard
4Q06 4Q05 Q/Q Growth
Revenue (Millions) $21,010 $20,510 2.44%
Earnings (Millions) -$1,187 $1,310 -190.62%
EPS* -$0.26 $0.30 -187.57%
Access Lines 38,961,000 41,234,000 -5.51%
Broadband Subscribers 11,716,000 8,559,000 36.89%
Video Subscribers** n/a n/a n/a
* For DT's EPS numbers, we used the "Basic Normalized EPS" provided by Reuters Research
**DT does not disclose subscribers data for its VDSL service

France Telecom: C+ Orange (NYSE: FTE) followed a script similar to DT's this time around. Revenues barely grew, and the company hit double digit declines in earnings and EPS. But FT did provide video subscriber numbers and showed a huge jump in that department. The company expects to be one of Europe's biggest IPTV players by 2010, and its broadband subscriber growth -- more than 30 percent -- is nothing to sniff at. But we're grading FT a bit stiff this time around because we're looking at full-year numbers, not just a single quarter, due to the company's reporting practices. Going forward, this may make it more difficult to make fun of the French, but we won't run away from the challenge. (See FT Revenues Up, Profits Down in '06 and Carrier Scorecard: Orange.)

Table 3: France Telecom's Full Year 2006 Scorecard
2006 2005 Y/Y Growth
Revenue (Millions) $67,916 $64,416 5.43%
Earnings (Millions) $6,054 $7,499 -19.27%
GAAP EPS $2.09 $3.00 -30.26%
Access Lines 40,278,000 41,855,000 -3.77%
Broadband Subscribers 9,656,000 7,400,000 30.49%
Video Subscribers 577,000 200,000 188.50%

Telefónica: B+ Telefónica SA (NYSE: TEF) has among the most geographically diverse customers with a mixed-up revenue base to match. So it's not entirely surprising that the company enjoyed huge growth in the fourth quarter in broadband subscriber numbers (up 41 percent) and video subscribers (up 55 percent). Revenues grew at a 50 percent clip, but earnings and EPS were off slightly as the company is also investing heavily in its mobile networks. Still, Telefónica's continued focus on pay TV and broadband is a good sign, and we were pleased to hear Alcatel-Lucent (NYSE: ALU) isn't totally abandoning the carrier's MiViewTV product, too. This carrier has come the closest yet to getting an "A". (See Telefónica Reports 2006, Telefónica Buys into PCCW, and Alcatel-Lucent Speaks Out on IPTV.)

Table 4: Telef�nica's Q4 2006 Scorecard
4Q06 4Q05 Q/Q Growth
Revenue (Millions) $18,648 $12,413 50.23%
Earnings (Millions) $1,375 $1,412 -2.62%
GAAP EPS $0.29 $0.30 -2.40%
Access Lines 42,340,700 40,589,900 4.31%
Broadband Subscribers 7,974,800 5,653,000 41.07%
Video Subscribers 1,064,000 683,200 55.74%

Telecom Italia: I Telecom Italia (TIM) gets an incomplete on this scorecard. We do note that the company's preliminary reports showed a slight decline in revenues, but a nice bump in earnings and EPS. We don't, however, have good data on its subscribers in video and broadband. And we're likely to see some changes in the reported financials, too, once we have a chance to get as close to a GAAP-like number as we can. For now, we'll give Telecom Italia an "I" -- and we'll look forward to hearing more. (See T Italia Outlines Strategy, Eurobites: Turnaround Time for Telecom Italia, and Telecom Italia Reports '06.)

Table 5: Telecom Italia's Q4 2006 Scorecard
4Q06 4Q05* Q/Q Growth
Revenue (Millions) $10,733 $10,974 -2.19%
Earnings (Millions) $889 $788 12.90%
GAAP EPS $0.05 $0.04 31.35%
Access Lines n/a n/a n/a
Broadband Subscribers n/a n/a n/a
Video Subscribers n/a n/a n/a
* Data provided by Reuter's Research.
Full data for this company won't be available until its annual report is issued.

— Raymond McConville, Reporter, and Phil Harvey, Managing Editor, Light Reading

DCITDave 12/5/2012 | 3:11:27 PM
re: Carrier Scorecard: Euro-rific Italtel didn't make this scorecard, but we'll have a story on its rather impressive results later today.

Lite Rock 12/5/2012 | 3:11:25 PM
re: Carrier Scorecard: Euro-rific Gosh Phil,

With LR's historically poor performance at nailing promised dates for stories and aquisition announcements, don't you think you are living on the edge here? :-)

I like your scorecard and would enjoy seeing you guys take it even further.

I'll detail what areas I have in mind for more detail after happy hour...! like, Monday!!

Thanks for you're sense of humor.

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