Analysts at Jefferies recently took an in-depth look at the telecom space, and they didn’t like what they see. In their report, analysts point to extreme market share competition weighing on the companies’ bottom lines.
AT&T Inc T 0.26%
Analysts believe that AT&T has taken a less aggressive approach so far in 2015 and shifted its focus from gaining market share to generating cash flow and profits.
Analysts see lower handset add numbers as more adds are shifted to tablets, and they are forecasting average revenue per user (ARPU) to decline by 11.5 percent for Q1. In addition, they are predicting a 2.8 percent drop in service revenue for the quarter.
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In the report, Jefferies lowered its earnings per share (EPS) outlook for AT&T by once cent for both 1Q15 and 2015 to $0.63 and $2.62 respectively.
T-Mobile US Inc TMUS 0.4%
Analysts are predicting the addition of 1.1 million postpaid handset subscribers and 300,000 prepaid subscribers after the company ran aggressive promotions during Q1.
However, promotions don’t come cheap, and the cost of gaining share will likely be reflected in the company’s earnings. Jefferies forecasts EBITDA of $1.26 billion for Q1, below consensus estimates of $1.37 billion.
Sprint Corp S 1.25%
Sprint introduced the “Cut Your Bill in Half!” promotion in December of 2014, leading to a wave of promotions by other names. Verizon followed with its 2-for-$100 6GB promotion, and T-Mobile brought back its 4-for-$100 10GB promotion, as well as adding a 2-for-$100 unlimited data option.
Analysts are concerned that Q1 consensus expectations for Sprint are “overly optimistic.”
Verizon Communications Inc VZ 0.29%
Analysts see Verizon’s continued focus on gaining market share weighing heavily on margins and ARPU. They lowered their 1Q15 EPS estimates from $0.98 to $0.96.
Despite the dreary outlooks, Jefferies has Buy ratings on AT&T, Verizon and T-Mobile.
They have an Underperform rating on Sprint.
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