Our analysis of forward guidance announced by some of the largest publicly traded telecoms groups suggests that most of them are looking for profitability, as measured by EBITDA, to increase during 2016.
Further detail can be found in the WTFB Group Guidance Tracker: 2016, which is part of Ovum’s World Telecoms Financial Benchmarks service (available by subscription).
While revenue growth is harder to come by, most telecoms groups appear more comfortable with profitability
Several telecoms groups have guided to lower top-line growth in 2016 than they did for 2015, including Millicom, Turkcell, Telefonica, and Etisalat. Etisalat, in particular, is looking for “stable” revenues in 2016 compared to guidance of 9% growth in 2015, highlighting challenges in some of the previously faster-growing emerging markets.
AT&T expects double-digit revenue growth for 2016, but this highest level of expected growth is related to its acquisition of DirectTV during 2015. The next highest guidance for revenue growth within our coverage is Turkcell, at 8–10%, both for its Turkey operations and the group overall. Only Tele2 and Swisscom have indicated that they expect revenues to fall in 2016 versus 2015 (and Swisscom tends to be conservative in its formal guidance – its reported 2015 results were well ahead of stated expectations).
So far, only three companies (Ooredoo, Etisalat, and Tele2) have indicated negative EBITDA development for 2016, out of 13 companies we track that have provided such guidance or indications. In June 2015, half of the companies covered in World Telecoms Financial Benchmarks gave guidance that profitability as measured by EBITDA (earnings before interest, tax, depreciation and amortization) would decline in the year ahead.
This collective expectation of improving profitability should be seen as encouraging, after relatively stable EBITDA for the industry in recent quarters. As the year progresses, more companies are likely to issue guidance or outlook statements, with many March-year-end companies likely to make such announcements in April and May.
Telecom Industry and Operator Benchmarks by Key Financial Metrics: 3Q15, TE0009-001494 (January 2016)
WTFB: 2015 Group Guidance Analysis,TE0009-001440 (March 2016)
Upin Dattani, CFA, Senior Financial Analyst, Forecasting & Financial Analysis