The Sunday Brief

Connecting technology, telecommunications, and the internet

Value Creation – Long-term charts, Fab Five vs. Telco Top Five (May 10)

by | May 11, 2024 | TSB

This was a quiet week for valuations for both the Fab Five (+$145 billion) and the Telco Top Five (+$12 billion). Since the week ending April 19 (so the last three weeks), however, the Fab Five is up a whopping $695 billion. That Friday was the last one prior to first quarter earnings. The Telco Top Five has also reduced its loss over that three-week period by $5 billion.

The sheet attached below also includes new share prices/ market capitalizations reflecting increased buybacks. As we discussed in last week’s Brief, the mother of all buybacks is Apple’s $110 billion announcement. We think that will keep the stock supported as they make the transition from smartphones to smarter AI devices.

Google’s announcement that they would be paying a dividend also helped to buoy the share price. Google’s annual I/O event is next Tuesday, and we anticipate additional product enhancements (preview here from Android Police) beyond the already announced Pixel 8a (here).

Meanwhile, rumors have started about US Cellular with The Wall Street Journal reporting last Friday (here) that T-Mobile would be bidding for some (or all) of the assets. As many Sunday Brief readers are aware, US Cellular and Verizon have some existing partnerships which are marketed under the Verizon brand (SEC doc here which describes the NY1 and NY2 arrangements). Assuming those are the only two that exist, the degree or carving is pretty small.

While US Cellular has a widely distributed footprint (see nearby pic from their 10-K), their population coverage is concentrated in five states: Wisconsin, Iowa, Nebraska, Oklahoma and Maine. The Midwest and North Carolina clusters should have high interest to T-Mobile (it would dramatically change their 5G network coverage in Nebraska) as many of those areas are not well served by the company today (and, as we saw in the Lumos analysis last week, they are growing populations by high single digits in many parts of the Southeast).

Regulatory approval will be difficult, and we would not be surprised to see both AT&T and Verizon lobby for significant concessions as a part of any transaction. But the Magenta carrier is clearly expanding to the countryside with this transaction if it comes to fruition.

The Affordable Connectivity Program (ACP) provisions widely hoped for in the Senate’s FAA bill did not materialize as Majority Leader Schumer decided to scrap nearly all of the amendments to get the bill passed. More on the developments from this Broadband Breakfast report.

Full file is below. The net debt levels discussed in last week’s Brief have also been updated.


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