This was an expectedly quiet week in the capital markets as investors get ready for a deluge of earnings reports. The Fab Five posted modest gains (+$23 billion for the week, +$124 billion over the fortnight), and the Telco Top Five were modestly lower (-$7 billion, +$15 billion). A dollar invested in T-Mobile or AT&T at the beginning of this year yielded higher returns through Friday than four of the Fab Five (Meta being the only exception).
For the Telco Top Five, three carriers reported earnings. We will begin to detail earnings next Sunday in the Brief, but here’s what has struck us so far:
- As we indicated in our 3Q preview, Verizon had to show progress with their prepaid business and did not disappoint. While 81K net additions represent a small percentage of their total base, the 300K swing from 3Q 2023 is laudable.
- We thought Verizon’s details concerning “Why Frontier? Why Now?” both in earnings and in their supplemental investor presentation were light. To begin the supplemental presentation with the statement that the pro forma company will still have nearly 50% of homes served by copper calls into question whether Verizon is assigning no (vs. negative) value to the copper footprint. Contrast that with AT&T’s conference call statements on how they will address the same issue. We are still scratching our heads on the $20 billion value and whether this is the best use of shareholder capital.
- We will spend a lot of time on Professor (John) Stankey’s master class on how to run an earnings conference call. More was said at that time than on T-Mobile’s and Verizon’s calls combined. We are still confused why AT&T Business is in disarray (transition is too weak of a word) but are going to dig into it this week for the upcoming Brief. We are also perplexed that AT&T continues to underperform on fiber additions (even when adjusting for hurricanes and strikes) given the economic boom occurring in the Southeast and Texas.
- T-Mobile is really firing on all cylinders and had signaled as much in last month’s Capital Markets Day. The one item that struck us in the Fact Book is that they listed “higher prepaid to postpaid conversions” as their top reason for postpaid phone net customer additions. We have been looking for some signs of growth due to their change to consistent payment history as the primary indicator of credit quality (vs FICO score). While this keeps prepaid net additions low, it helps the headline number (but also hurts postpaid ARPA and ARPU as these are primarily 1-2 line accounts). More on T-Mobile’s strong report next week.
File is below. Apple iPhone 16 Pro and Pro Max backlog information is going to be posted later today. Go Chiefs!
