Carrier Progress Report: AT&T, Sprint, T-Mobile, and Verizon

It’s the beginning of the year, and 2012 is poised to be a major period of change for the American cell carriers. 2011′s failed T-Mobile buyout shook up an industry which was seemingly destined for a two carrier duopoly. Thanks to Sprint’s lobbying efforts, and a protective Justice Department, we’re looking at a less clear future in the telecommunications market with increased competition between the three big carriers— AT&T, Sprint, and Verizon.

Who’s in better shape? Read the rest of our 2012 Progress Report to find out what this exciting year has in store for TelCo enthusiasts.

After the AT&T-T-Mobile deal was killed late last year, analysts were unsure about AT&T’s once-bright future. Well, turns out AT&T’s not in such a bad spot after all. Unfortunately for Ma Bell, the T-Mo escapade involved a $4 billion loss. At a quick glance, that may look like a lot of outflow. But, a closer look at AT&T’s cash flow situation shows a company that’s not struggling too badly.

AT&T’s operating at an unsustainable 5.9% yield and 87% payout ratio. But, their debt-to-equity ratio is 0.63— that means AT&T’s not drowning in debt (unlike other TelCo’s). AT&T’s also growing quite well. While their earnings-per-share growth is nine times lower than Verizon‘s, their dividend-per-share growth is a tad higher than Verizon. That suggests that AT&T’s a better long-term investment right now.

So, how will AT&T get their spectrum now that the T-Mobile bid was squashed? Looks like there are not-so-secret plans to buy, buy, buy. During 2011, AT&T set up possible negotiations between future spectrum providers through negotiations with the FCC. AT&T already acquired Qualcomm and D&E Investments’ 700 MHz spectrum. Now, it looks like at least three to four more 700 MHz spectrum deals in Washington, Massachusetts, Minnesota, and Wisconsin are in the works. In fact, AT&T is the largest holder of >1 GHz spectrum in the nation. In addition to the 700 MHz spectrum, AT&T owns some 850 MHz spectrum for LTE integration as well.

AT&T deployed more devices (over 10) at CES than any other carrier, which suggests they won’t be slowing down on the LTE device competition front. But, if Ma Bell wants to compete in this Verizon-dominated market, the company must build out its LTE network as fast as possible. And, if possible, AT&T needs to beat Verizon to nationwide LTE Advanced coverage.

Sprint’s in third place right now in the American turf war, edging out T-Mobile for their spot. Recently, Sprint’s LTE plans were just thrown a massive curve ball as multiple federal agencies ruled that LightSquared’s LTE network is irreparable. The Sprint-LightSquared deal is on the rocks now as LightSquared will be unable to provide the LTE buildout for Sprint.

As a result, roughly 80-percent of Sprint’s planned LTE reinforcement will be lost. Unless the government can be successfully lobbied in LightSquared’s favor, expect a move away from the deal on the Sprint side. That would indicate a possible further investment in Clearwire’s LTE network. Thankfully, Sprint’s planning a more competitive quad-band LTE network for the future. Right now, Sprint needs to secure the future of their LTE network. If they are unable to do so, Sprint will not be as competitive as they want to be in 2013.

On the bright side, Sprint’s reinforcing their dual-band CDMA network through their Network Vision strategy. It’s already led to some destressing of critical areas on the network, and the 800 MHz improvements will be an intense lift up— the kind that Sprint users desperately need.

Financially, Sprint’s in a tough spot. Their earnings yield is down to -36.8%. Compared with AT&T’s 6.58% and Verizon’s 6.42% yields respectively, Sprint investments are looking grim. Plus, Sprint’s got a burdensome 142% debt-to-equity ratio– one that they’re not paying off anytime soon. Sprint’s dividend-per-share growth is nill, because there is no growth here.

Sprint had a weak end of 2011, and their showing at CES was a bit lacking. But, as indicated by Sprint’s David Owens, April and beyond in 2012 will be high tide for Sprint device releases. With an LTE Galaxy Nexus incoming, Sprint’s poised to be a major player in the Android market.

Sprint needs to clear up their debt problems and figure out a way to deploy their LTE network in a way that doesn’t inhibit GPS signals.

T-Mobile’s in between a rock and a hard place as their merger with AT&T was destroyed by regulators. Their parent company, Deutsche Telekom, isn’t in a good spot financially to invest in T-Mobile’s success in the United States.

While their HSPA+ 42 Mbps build-out is trucking along successfully, T-Mobile has absolutely no 4G LTE plans for 2012 or 2013. This leaves them far behind the other American carriers.

Now, Deutsche Telekom is scrambling for investors that will help it build up T-Mobile’s network if a buyout doesn’t succeed. Look for T-Mobile to reach out to others for a merger or network sharing deal in 2012.

Verizon’s sitting in the prettiest spot of all the American carriers currently. Their 4G LTE network currently covers nearly 200 million Americans. They’re vastly ahead of long-term rival AT&T in LTE deployment, and they’re growing a subscriber base that’s close to beating out Ma Bell.

Through competitive future deployment, Verizon took AT&T’s “fastest mobile network” badge from 2007 away. Now, the question remains— will Verizon beat AT&T and Sprint to LTE Advanced network technology? We should see some of that progress in late 2012 with our first LTE Advanced cities in 2013.

At the moment, Verizon’s repping a nice debt-to-equity ratio of 63%. To maintain their position, Verizon needs to gain that second win and grab LTE Advanced before any of the other American carriers.