Rahul Kenkre, Prashant Padelkar and Nisha Parmani contributed to this note
Verizon Wireless (VZ) has announced its plan to acquire Alltel Corp. (AT) which would make it the largest cellular carrier in the U.S. This acquisition should not only push Verizon past AT&T Inc. (T) in terms of number of subscribers, but also put additional pressure on T-Mobile USA Inc. and Sprint Nextel Corp. (S). read more…
Vijay Fernandes and Dipali Pujara also contributed to this note
In continuation to our previous note on ‘North American Telecom capex’,
we have extended our analysis of capex review to Asian telecom companies. We have compiled capex and revenue trend for 10 Asia-Pacific companies for this analysis and have done a quick analysis of capex of five major Asia-Pacific telecom companies.
Capex as a percentage of revenue for countries in Asia-Pacific has slowed down in CY07 in regions with high wireless penetration as well as moderate penetration. The decrease can be attributed to high penetration leading to a slowdown in network expansion. An overall average of the seven wireless companies in Asia-Pacific places capex as a percentage of revenue at 19% for the nine months of CY07, compared with 23% in CY06.
Capex as a percentage of revenue for companies providing wireline services in Asia-Pacific has shown a declining trend over the past two years. An overall average of the six wireline companies in Asia-Pacific places capex as a percentage of revenue at 18% for the nine months of CY07, compared with 20% in CY06. read more…
Capex as a percentage of revenue for US telecom service providers has slowed in FY07. We attribute this slowing to a combination of already high penetration and coverage quality, and accelerated capex in FY06 arising from network restructuring. We find that growth pockets are limited to a few high growth companies with national network expansion ambitions.
The current capex trend is downward. Our study of capex and revenue trends of US telecom service providers leads us to conclude that capex spending trended down during the period studied for big telecom companies in North America. Looking at the average capex as a percentage of revenue, we see that the 5 largest telecom providers in North America spent 18% in FY05 and 17% in FY06 and 12% through the first 3 quarters of FY07. We have compiled 26 North American companies’ capex and revenue trend for this analysis and have done quick analysis of capex of five major US telecom companies.
What are the potential catalysts? It is possible that the current slowdown is a breather before service providers scale up capex post the 700MHz auction in early FY08 and commit more to 3G network and broadband infrastructure rollout. However, slowdowns in consumer spend and in the related areas of housing and infrastructure remain a key risk to capex growth in FY08.
The Gridstone platform currently covers 62 of the largest global telecom companies, and it regularly tracks as-reported-by company data on segment revenue, capex and other financial and operating metrics. For a complete list of telecom coverage see Appendix A. read more…
Leap Wireless (LEAP) rejected MetroPCS’s (PCS) unsolicited merger proposal after analyzing that the offer was not in the best interest of the company and its shareholders. On September 04, 2007, PCS announced a proposal for merger with LEAP.
Our analysis of the two companies, using the Gridstone Research platform leads us to conclude that this merger would be positive for LEAP as well as PCS, since it would create a fifth national wireless carrier with licenses covering most of the top 200 markets in the United States.
