With the stock market in a deep funk (and getting funkier by the day) investors are looking for safe places to park their money, like stocks that pay healthy dividends. Which would be telecom stocks, right?
Maybe not.
The truth is that telecom stocks there are really only three biggies these days; AT&T (T), Verizon (VZ) and T-Mobile (TMUS) arent what they used to be. Some say that has to do with their disastrous forays into the world of media, but its probably more a matter of failed execution and the maturation of the business.
First the media math. Remember that within a two-week period in May of last year, both AT&T and Verizon jettisoned WarnerMedia and Yahoo, their respective content properties, (yes, the latter owns my employer, Yahoo Finance). These moves were made to rid the data-driven, left-brain telcos of frivolous, flowery never mind costly media businesses. Getting out of content, the thinking went, would allow the telephone companies distribution businesses to run full-out and unfettered, which would presumably be a boon to shareholders.
My days are a little bit more predictable than they were a couple of years ago, AT&T CEO John Stankey told Yahoo Finance's Brian Sozzi this week. That's one of the reasons why we made the decision to do what we're doing. I didn't think I could do my best work or the broader management team could do their best work if we were trying to fight too many battles on too many different fronts. We are a more focused company today. We're executing each week better than we were the week before, but we still have room to go.
John Stankey speaks onstage at HBO Max WarnerMedia Investor Day Presentation at Warner Bros. Studios on October 29, 2019 in Burbank, California. (Photo by Presley Ann/Getty Images for WarnerMedia)
For sure on that last point.
Since May 15, 2021, roughly when these announcements were made, Verizons stock is down 18% and AT&T is down 19%. The S&P is only off 4%. The stocks still underperform the market after factoring in their 6% plus dividend yields.
Perhaps thats surprising given these companies made game-changing announcements particularly in the case of AT&T, as its divestment of content was a much bigger move relative to the size of its overall business. Its also surprising since both AT&T and Verizon stocks sport generous dividend yields, which ideally would bolster the shares during a market downturn.
Story continues
Did deep-sixing the content businesses help the telcos stocks? No, it did not.
Before we get more into that, lets first consider T-Mobile, once ridiculed (and still loathed) by the Big Two, for its over-the-top former CEO, John Legere, and its garish (yet effective) pink branding. Legere stepped down two years ago, but, guess what, T-Mobile is now ascendent if not triumphant. Barrons recently pointed out that T-Mobile has a bigger market cap ($177 billion) than Verizon ($173 billion) or AT&T ($119 billion). True, both Verizon and AT&T are more leveraged, so that the overall enterprise value of the two older companies is bigger. But the fact remains that T-Mobile stock has trounced Verizon and AT&T and the market over the past five years.
John Legere arrives at Manhattan Federal Court during the T-Mobile/Sprint federal case in New York, U.S., December12, 2019. REUTERS/Shannon Stapleton
Why is that? In a word, execution. T-Mobile merged with Sprint, priced aggressively to build market share, and most importantly, improved its network.
TMUS 5g network is probably 18 months ahead of AT&T and Verizon's, if not a little more, says Keith Snyder, an industry analyst at CFRA. [AT&Ts and Verizons] balance sheets are bad. Those two companies combined have about $300 billion that they need to get off their balance sheet at some point. Meanwhile, they need to spend very heavily on network deployments and new spectrum.
And another thing: Verizon's stock price is lower than it was 20 years ago. AT&T's stock price is lower than it was 20 years ago, says veteran industry analyst Craig Moffett. Granted, they've paid dividends, but the total return by owning those stocks has been less than what you would have gotten from a corporate bond."
Someones made money here, though. As this 2017 McKinsey report points out, internet giants Amazon, Google and Facebook have built up massive businesses on the networks of AT&T and Verizon. The combined market caps of those three tech giants $3 trillion is 6.4 times that of the three telcos' $469 billion.
So did AT&T and Verizon blow it by not being able to marry content with distribution? Moffett thinks thats a red herring.
I'm not sure the tug and sway between content and distribution has ever been a terribly relevant thesis, Moffett says. It's one of those things that people like to talk about, but it doesn't really have all that much real-world application. Partially the problem with trying to be vertically integrated is that the law frowns on it. So there's limitations on what you could do. You could theoretically make content exclusive and that sort of thing, but as carriers you generally aren't allowed to do that. So there isn't really any particular strategic logic for being vertically integrated.
To Moffett its more a matter of two companies with declining businesses and bloated balance sheets that will struggle to pay their dividend down the road. AT&T already cut its dividend as part of its divestiture of the media business earlier this year.
As for the companies path forward: They're not going to go bankrupt, Snyder says. They're established, their businesses are generating cash. It's just that they need to rethink what they're doing. Moffett offers a more succinct prognosis: It's terrible.
On the other hand, both analysts are sanguine about T-Mobile, which they say will continue to grow at the incumbents expense.
Is there any optimism to be had AT&T or Verizon? The bull case for Verizon or AT&T is that expectations are so low that the stocks have nowhere to go but up, Moffett says. And as long as they maintain the dividend, that thesis could perhaps work. But then he adds: The problem is, as we've seen so often with these companies, if they can't generate any growth, then the sustainability of the dividend eventually is in doubt.
For Verizon and AT&T, its not a great position to be in. Turns out even big splashy media deals couldn't help them.
This article was featured in a Saturday edition of the Morning Brief on Saturday, September 17. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Follow Andy Serwer, editor-in-chief of Yahoo Finance, on Twitter: @serwer
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
See the original post here:
How media and T-Mobile got the better of AT&T and Verizon - Yahoo Finance
- NBA playoffs: Bucks G Patrick Beverley chucks ball at multiple Pacers fans amid elimination - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Britney Spears says she feels 'harassed' after paramedics respond to incident at Chateau Marmont: The latest - Yahoo Entertainment - May 3rd, 2024 [May 3rd, 2024]
- How the Knicks' special chemistry helped them turn back the 76ers - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- 11 stocks that mattered most this earnings season - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- Fed holds interest rates at 23-year high, citing 'lack of further progress' on inflation - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- Odell Beckham Jr. reportedly signing 1-year, $8.25 million deal to join Dolphins - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- How to watch the 2024 Kentucky Derby: Post positions, odds, where to stream and more - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- The Buzz: What would a fantasy baseball draft look like today? - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- 2nd Boeing whistleblower found dead. Here's a timeline of the company's mounting problems. - Yahoo! Voices - May 3rd, 2024 [May 3rd, 2024]
- Trump trial live updates: Hope Hicks called to the stand as testimony resumes in hush money case - Yahoo! Voices - May 3rd, 2024 [May 3rd, 2024]
- Brandon Aubrey thinks soccer background will "absolutely" help with new kickoffs - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Kentucky Derby: Fierceness' odds keep shrinking ahead of the 150th race - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- How to watch the 2024 WNBA preseason tonight: Caitlin Clark's first Indiana Fever game time, channel and more - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Amazon Web Services CEO: We're on track to hit $100 billion in sales in 2024 - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- NFL Power Rankings, draft edition: Did Patriots fix their offensive issues? - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Lynch reveals how he engaged Shanahan on 49ers GM job - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Drake, Adele, and others are following Taylor Swift back onto TikTok after Universal deal - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- Boss Orders Employee 'Be Prepared To Cancel Or Reschedule Your Wedding' After Layoffs, Despite Her Giving A ... - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- May Reliever Rankings - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Kyle Hendricks pelted by a line drive during Double-A start - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- China publicizes for the first time what it claims is a 2016 agreement with Philippines - Yahoo! Voices - May 3rd, 2024 [May 3rd, 2024]
- What Pearsall believes Green will bring to 49ers defense - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- What to know about Rickwood Field ahead of Giants-Cardinals game - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Biden says Americans have 'right to protest but not the right to cause chaos' on college campuses after another night of ... - Yahoo! Voices - May 3rd, 2024 [May 3rd, 2024]
- Billam-Smith 'motivated to avenge loss' to Riakporhe - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Chinese Grand Prix 2024: How to watch tonight's F1 race without cable - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- Was it legal for Kristi Noem to shoot her puppy and what other options did she have? - Yahoo! Voices - May 3rd, 2024 [May 3rd, 2024]
- Apple unveils record $110 billion buyback as results beat low expectations - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- Paramount has spent a decade as the source of buyout rumors. That might finally come to an end. - Yahoo Finance - May 3rd, 2024 [May 3rd, 2024]
- Lynch reveals hilarious truth about transition from player to GM - Yahoo Sports - May 3rd, 2024 [May 3rd, 2024]
- 7 Social Security Shakeups You Need To Be Ready For Heading Into the New Year - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Crypto had a surprisingly great year. It still faces threats in 2024. - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- 'How the hell does that even happen?' McCarthy exits Congress amid confusion over who can run to replace him - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Short sellers lost close to $178 billion in 2023 - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Trump legal news brief: Giuliani files for bankruptcy after judge rules he must immediately pay $148 million for election ... - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- No One Wants Used EVs, Making New Ones a Tougher Sell Too - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Israel's military campaign in Gaza seen as among the most destructive in recent history, experts say - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Barbara Corcoran Says Housing Prices 'Are Going To Go Through the Roof' But When? - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Are You Wealthy? The Net Worth You Need To Be Considered Poor, Middle-Class And Wealthy In America - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- German bishop Btzing criticizes pope over Ukraine and Israel stance - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- 'Severe revenue decline': California faces a record $68 billion deficit here's what is eating away at the Golden State's ... - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Poll: Trump is tied with Biden for now but criminal trials and unpopular plans pose risks for 2024 - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Rudy Giuliani files for bankruptcy days after being ordered to pay $148 million in defamation case - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- 'It's just bragging rights': Once you achieve this credit score there's 'no benefit' to scoring higher, expert says here are ... - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Records released by House Republicans show that Joe Biden repeatedly emailed Hunter Biden's business associate ... - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Tesla Getting Trounced by S&P 500 Three Years After Joining - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Ukrainian forces shoot down three Russian Su-34 fighter jets on southern front - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- The only AI 'regulation' coming is from workers - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Innocent Black Man Spent 50 Years in Prison, His Compensation Will Annoy The Hell out of You - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Texas begins flying migrants from southern border to Chicago. The 1st plane carried over 120 people - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- Donald Trump Is Running Scared - Yahoo News - December 22nd, 2023 [December 22nd, 2023]
- The biggest 2024 threat to Big Tech is coming from both sides of the Atlantic - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- Apple halts online sales of its Apple Watch Series 9 and Apple Watch Ultra 2 - Yahoo Finance - December 22nd, 2023 [December 22nd, 2023]
- 2023 FIBA World Cup: Jaren Jackson Jr.'s elite rim protection and defensive presence come with a price - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Fantasy Football Rankings: These are the hardest players to ... - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Cowboys QB Dak Prescott feels for Will Grier after Trey Lance deal, not worried about future in Dallas - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Massive alligator captured in Mississippi is a new state record. Nightmare material - Yahoo! Voices - August 28th, 2023 [August 28th, 2023]
- Virginia Gov. Youngkin eyes a 15-week abortion ban as a 'consensus' voters would back - Yahoo News - August 28th, 2023 [August 28th, 2023]
- Poll: Trump could be in big trouble for 2024 if convicted of crimes - Yahoo News - August 28th, 2023 [August 28th, 2023]
- 'She-Hulk' star Tatiana Maslany nearly brought to tears after overcoming fears of heights and cold with the help of Bear Grylls - Yahoo Entertainment - August 28th, 2023 [August 28th, 2023]
- Don't feel guilty about being lazy. Experts say there are some health benefits. - Yahoo Life - August 28th, 2023 [August 28th, 2023]
- Center Paolo Banchero helps Team USA power past physical New Zealand in FIBA World Cup - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Tyreek Hill says Tua's response to ESPN criticism 'fires me up,' shows Dolphins something they've never seen - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- USA's Katie Moon, Australia's Nina Kennedy agree to share pole vault gold after tie atop World Athletics Championships - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Blue Jays' Bo Bichette, Matt Chapman leave game vs. Guardians with injuries - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Benches clear twice as Rays roll past Yankees 7-4: 'It's a last-place team' - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- All-Pro Chris Jones says hes willing to extend Chiefs holdout through Week 8 - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Fyre Festival II: Andy King confirms he's working with Billy McFarland for 'redemption'; 1st drop sells out - Yahoo Entertainment - August 28th, 2023 [August 28th, 2023]
- Pirates first overall pick Paul Skenes doesn't make it out of 1st inning in Double-A debut - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- U.S. men and women sweep gold in 4x100m relay at World Championships - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Spain soccer president Luis Rubiales apologizes for kissing player, as calls for his resignation mount - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- COVID cases are rising. What are schools doing about it? - Yahoo Life - August 28th, 2023 [August 28th, 2023]
- Nicolas Batum ashamed and scared to go home after France is knocked out of FIBA World Cup - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- Tour Championship: How much did Viktor Hovland, others earn at East Lake? - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- The Daily Sweat: Cubs get chance to cut into streaking Brewers' NL Central lead - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- NASCAR: Chris Buescher wins at Daytona after Ryan Preece's car flips at least 10 times in terrifying crash - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- With college sports more in flux than ever before, new players association group emerges - Yahoo Sports - August 28th, 2023 [August 28th, 2023]
- NFL Hall of Fame Game: How to watch the 2023 NFL preseason opener - Yahoo Sports - July 31st, 2023 [July 31st, 2023]
- 2023 NFL preseason: How to watch, full schedule, streaming info and more - Yahoo Sports - July 31st, 2023 [July 31st, 2023]
- Reports: Colts considering placing Jonathan Taylor on NFI list, which could negate his 2023 salary - Yahoo Sports - July 31st, 2023 [July 31st, 2023]