Mgt615 verizon-sap case-carlos bardales

SAP CASE: VZby Carlos Bardales

Course: MGT615-FProfessor: Dr. Thomas Pittz

UNIVERSITY OF TAMPAJOHN H. SYKES COLLEGE OF BUSINESS

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TABLE OF CONTENTS

INTRODUCTION ....................................................................................................... 8

1. PART1 – EXTERNAL INDUSTRY / ANALYSIS ................................................. 9

1.1 Economic characteristics of the industry....................................................... 12

517110 Wired Telecommunications Carriers .................................................... 12

517210 Wireless Telecommunications Carriers (except Satellite) ..................... 13

Market size (sales)............................................................................................ 13

Sales growth rate.............................................................................................. 14

Stage of the life cycle (of the industry) .............................................................. 14

TYPE OF Products sold.................................................................................... 15

Variations in sales............................................................................................. 15

Profit margins.................................................................................................... 16

Scope of rivalry ................................................................................................. 17

Key competitors in the industry ......................................................................... 17

1.2 Key success factors (KSF) for the industry ................................................... 20

Available capital for investment......................................................................... 20

Ability to detect trends and implement new technologies .................................. 21

Vertical integration and economies of scale ...................................................... 22

Telecommunication assets................................................................................ 24

1.3 Porter’s 5 Forces analysis ............................................................................ 27

Threat of New Entrants – HIGH ........................................................................ 27

Bargaining Power of Buyers – HIGH................................................................. 28

Threat of Substitute Products or Services - HIGH ............................................. 28

Bargaining Power of Suppliers - LOW............................................................... 28

1.4 Macro environmental trends ......................................................................... 29

1.5 Summary of resources.................................................................................. 30

2. PART2 – INTERNAL / COMPANY ANALYSIS................................................. 32

2.1 Assess Performance .................................................................................... 32

Generic strategy ............................................................................................... 32

How well does the company meet the key success factors ............................... 32

Available capital for investment......................................................................... 32

Ability to detect trends and implement new technologies .................................. 32

Economies of scale and Vertical Integration ..................................................... 33

Telecom assets................................................................................................. 33

2.2 Brief description of the company................................................................... 34

What the company does (what are its products or services) ............................. 34

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Who customers are........................................................................................... 35

Where they operate .......................................................................................... 35

Firm size (sales and number of employees)...................................................... 36

Year Company founded & history growth.......................................................... 37

History of growth............................................................................................... 37

Summary of acquisitions................................................................................... 40

2.3 Mission of the company................................................................................ 40

Financial analysis ............................................................................................. 41

BENCHMAR WITH COMPETITORS ................................................................ 42

2.4 VRIO analysis............................................................................................... 50

Subscribers database ....................................................................................... 50

Coverage .......................................................................................................... 51

Capital INVESTMENT....................................................................................... 51

Human Resources ............................................................................................ 52

Assets............................................................................................................... 52

Product Portfolio ............................................................................................... 52

3. PART3 - RECOMMENDATIONS ..................................................................... 53

3.1 CRITICAL STRATEGIC ISSUES FACING THE FIRM.................................. 53

politics due to change of technology ................................................................. 53

Problems with Yahoo purchase ........................................................................ 54

low diversification of offered content ................................................................. 54

3.2 Recommendations........................................................................................ 54

3.2.1 Recommendation 1 ................................................................................... 56

Implementation strategies. ................................................................................ 56

Responsibilities................................................................................................. 56

Period of implementation .................................................................................. 56

Resources ........................................................................................................ 56

3.2.2 Recommendation 2 ................................................................................... 56




Resources ........................................................................................................ 57

3.2.3 Recommendation 3 ................................................................................... 57




Resources ........................................................................................................ 57

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4. URLS............................................................................................................... 57

5. appendix.......................................................................................................... 59

VZ - BALANCE SHEET .................................................................................... 59

VZ – INCOME STATEMENT ............................................................................ 61

VZ – STATEMENT OF CASH FLOW................................................................ 62

AT&T – BALANCE SHEET ............................................................................... 63

AT&T – INCOME STATEMENT........................................................................ 64

AT&T – CASH FLOW ....................................................................................... 65

T-MOBILE BALANCE SHEET .......................................................................... 66

T-MOBILE – INCOME STATEMENT ................................................................ 67

T-MOBILE – CASH FLOW................................................................................ 68

SPRINT – BALANCE SHEET ........................................................................... 69

SPRINT – INCOME STATEMENT .................................................................... 70

SPRINT – CASH FLOW STATEMENT ............................................................. 71

VERIZON FINANCIAL RATIOS ........................................................................ 72

AT&T FINANCIAL RATIOS............................................................................... 75

T-MOBILE FINANCIAL RATIOS ....................................................................... 79

SPRINT FINANCIAL RATIOS........................................................................... 83

VERIZON OPERATIONAL RESULTS (USD Millions)....................................... 87

AT&T OPERATIONAL RESULTS (USD Millions) ............................................. 88

T-MOBILE OPERATIONAL RESULTS (USD Millions)...................................... 88

SPRINT OPERATIONAL RESULTS (USD Millions).......................................... 88

6. Bibliography..................................................................................................... 89

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TABLES

Table 1-Telecom Industry - Revenues, Profits, EBIT, EBT and Net Income .................. 13

Table 2-TELECOM INDUSTRY - GLOBAL COMPETITORS......................................... 18

Table 3-Telecom Industry, USA Total Revenues in USD Millions .................................. 18

Table 4-Examples of MVNO's in USA............................................................................ 20

Table 5-Debt Categorization in the Industry................................................................... 21

Table 6 - Biggest Fiber Optic Providers in USA ............................................................. 25

Table 7-Telecom Industry, Numer of suscribers ............................................................ 27

Table 8-Summary of resources ..................................................................................... 31

Table 9-Telecom Revenue by Operator......................................................................... 42

Table 10-TELECOM INDUSTRY SALES GROWTH PERCENTAGE ............................ 43

Table 11-Telecom Industry – EBIT ................................................................................ 44

Table 12-Telecom Industry - Interests ........................................................................... 44

Table 13-Telecom Industry - Taxes ............................................................................... 45

Table 14-Telecom Industry - NOPAT(Net Income) ........................................................ 45

Table 15-Telecom Industry, Operating Cash ................................................................. 46

Table 16-Telecom Industry, Financing........................................................................... 47

Table 17-Service Revenues for Mobile Wireless Service............................................... 47

Table 18-Telecom Industry, ARPU ................................................................................ 48

Table 19-Telecom Industry, Number of Subscribers ...................................................... 50

Table 20-Telecom Industry Investment.......................................................................... 51

Table 21-VRIO Analysis Verizon ................................................................................... 53

Table 22-Verizon Balance Sheet ................................................................................... 61

Table 23-Verizon Income Statement ............................................................................. 61

Table 24-Verizon Statement of Cash Flow .................................................................... 63

Table 25-AT&T Balance Sheet ...................................................................................... 64

Table 26-AT&T Income Statement ................................................................................ 65

Table 27-AT&T Cash Flow ............................................................................................ 66

Table 28-T-Mobile Balance Sheet ................................................................................. 67

Table 29-T-Mobile Income Statement............................................................................ 67

Table 30-T-Mobile Cash Flow........................................................................................ 69

Table 31-Sprint Balance Sheet...................................................................................... 70

Table 32-Sprint Income Statement ................................................................................ 70

Table 33-Sprint Cash Flow Statement ........................................................................... 71

Table 34-Verizon Financial Ratios ................................................................................. 73

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Table 35-AT&T Financial Ratios.................................................................................... 76

Table 36-T-Mobile Financial Ratios ............................................................................... 80

Table 37-Spring Financial Ratios................................................................................... 84

Table 38-Verizon Operational Results ........................................................................... 88

Table 39-AT&T Operational Results .............................................................................. 88

Table 40-T-Mobile Operational Results ......................................................................... 88

Table 41-Sprint Operational Results.............................................................................. 89

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FIGURES

Figure 1-Traffic patterns in Telecom Industry .................................................................. 9

Figure 2-Usage of Data in Telecom Industry ................................................................. 10

Figure 3-Smartphone use increase to access data........................................................ 10

Figure 4-Distribution of Wireless and Landlines in Households ..................................... 11

Figure 5-Reasons to use smartphones.......................................................................... 11

Figure 6-Trends in No of Wireless Subscribers and ARPU............................................ 12

Figure 7-Telecom Industry - Revenues, Profits, EBIT, EBT and Net Income ................. 14

Figure 8-Telecom Industry Sales Growth Rate (%)........................................................ 14

Figure 9-Telecom Industry Life Cycle Stage .................................................................. 15

Figure 10-Telecom Industry - Variation in Sales from year to year (USD Millions) ......... 16

Figure 11-Telecom Industry - Profit Margins (USD Millions) .......................................... 17

Figure 12-TELECOM INDUSTRY - GLOBAL COMPETITORS...................................... 18

Figure 13-USA National Competitors............................................................................. 19

Figure 14-Telecom Industry - Cash, Investment and Financing (USD Millions).............. 20

Figure 15-From 1G to 5G .............................................................................................. 22

Figure 16 - Submarine Fiber Optics connected to US.................................................... 24

Figure 17-Tower sites per County per density ............................................................... 26

Figure 18-Radio Spectrum distribution in the USA Industry ........................................... 26

Figure 19-Teleco Industry, Number of subscribes ......................................................... 27

Figure 20 - New services to be provided with 5G technology......................................... 28

Figure 21-Mobile phone radiation penetrates the brain.................................................. 29

Figure 22-Verizon Strike................................................................................................ 30

Figure 23-The Federal Communications Commission (FCC)......................................... 30

Figure 24-Wireless coverage non-rual and rural ............................................................ 33

Figure 25-LTE Coverage non-rural and rural ................................................................. 34

Figure 26-LTE Speed by service provider...................................................................... 34

Figure 27-Verizon offices in the world............................................................................ 35

Figure 28 – Comparison VZ with Sprint (S), AT&T (T) and T-Mobile (TMUS) – Source:

cnbc.com ............................................................................................................................ 42

Figure 29 – Comparison VZ with SP&500(SPX), NASDAQ Financial (IXF) and NASDAQ

Telecommunication (IXUT) – Source: cnbc.com ................................................................. 42

Figure 30-Telecom Revenue by Operator...................................................................... 43

Figure 31-TELECOM INDUSTRY SALES GROWTH PERCENTAGE ........................... 43

Figure 32-Telecom Industry - EBIT................................................................................ 44

Figure 33-Telecom Industry - Interests .......................................................................... 44

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Figure 34-Telecom Industry - Taxes .............................................................................. 45

Figure 35-Telecom Industry, NOPAT (Net Income) ....................................................... 46

Figure 36-Telecom Industry, Operating Cash ................................................................ 46

Figure 37-Telecom Industry, Financing.......................................................................... 47

Figure 38-Service Revenues for Mobile Wireless Service ............................................. 48

Figure 39-Telecom Industry, ARPU............................................................................... 48

Figure 40-Quarterly net adds (USD Millions) ................................................................. 49

Figure 41-Churn (average monthly)............................................................................... 50

Figure 42-Telecom Industry, Number of Subscribers..................................................... 51

Figure 43-Telecom Industry, Investment (USD Millions) ................................................ 52

Figure 44-Verizon Liquidity Ratios ................................................................................. 73

Figure 45-Verizon Profitability Ratios............................................................................. 73

Figure 46-Verizon Activity Ratios................................................................................... 74

Figure 47-Verizon Interest Coverage Ratios.................................................................. 74

Figure 48-Verizon Operating Return Ratios................................................................... 75

Figure 49-Verizon Leverage Ratios ............................................................................... 75

Figure 50-AT&T Liquidity Ratios.................................................................................... 77

Figure 51-AT&T Profitability Ratios................................................................................ 77

Figure 52-AT&T Activity Ratios...................................................................................... 78

Figure 53-AT&T Interest Coverage Ratios..................................................................... 78

Figure 54-AT&T Operating Return Ratios...................................................................... 79

Figure 55-AT&T Leverage Ratios .................................................................................. 79

Figure 56-T-Mobile Liquidity Ratios ............................................................................... 81

Figure 57-T-Mobile Profitability Ratios........................................................................... 81

Figure 58-T-Mobile Activity Ratios ................................................................................. 82

Figure 59-T-Mobile Interest Coverage Ratio.................................................................. 82

Figure 60-T-Mobile Operating Return Ratios ................................................................. 83

Figure 61-T-Mobile Leverage Ratios ............................................................................. 83

Figure 62-Spring Liquidity Ratios................................................................................... 85

Figure 63-Sprint Profitability Ratios ............................................................................... 85

Figure 64-Sprint Activity Ratios ..................................................................................... 86

Figure 65-Sprint Interest Coverage Ratios..................................................................... 86

Figure 66-Sprint Operating Return Ratios...................................................................... 87

Figure 67-Sprint Leverage Ratios.................................................................................. 87

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INTRODUCTION

As part of MGT615 course, we have to make a SAP Case analysis of a company in

order to determine useful and realistic recommendations. I have chosen VERIZON since I am

a Telecom consultant and I am familiarized with the telecommunication industry. Dr. Pittz has

provided me with the tools in order to analyze the industry and the company. In the following

pages, I present the result of my research about this influencing industry.

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1. PART1 – EXTERNAL INDUSTRY / ANALYSIS

Telecommunication industry is facing major challenges. Fierce competition for scarce

resources like radio spectrums and subscribers and necessity to implement new

technological advancements occur in short term periods. This in an industry that never

stops innovating. Capital needed to keep the pace is huge. Costs decrease is obtained

through vertical integration. Merges, acquisitions and sells are made every year none of

them are millions but billions of dollars. In spite of the fierce competition, still and industry

with considerable profit margins. Market value of the industry is comparable to software

companies and just surpassed by biotechnological companies. The reason could be in the

demand. US consumers look at their devices 150 times per day in average, that generates

a traffic over 30 billion times a day (assuming 200 million smartphones in American market)

and this metric continues to grow. Operators1 must identify creative ways to satisfy this

increasing demand. Maybe considering traffic patterns, usage, access trends and

behavioral cohorts.

Figure 1-Traffic patterns in Telecom Industry

1 Operators refer to telecommunication companies like Verizon, AT&T, T-Mobile and

Sprint.

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Figure 2-Usage of Data in Telecom Industry

Figure 3-Smartphone use increase to access data

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Figure 4-Distribution of Wireless and Landlines in Households

Figure 5-Reasons to use smartphones

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Figure 6-Trends in No of Wireless Subscribers and ARPU2

1.1ECONOMIC CHARACTERISTICS OF THE INDUSTRY

Telecommunication Industry encompass a broad scope of technologies. It includes

wired, wireless, satellites, hosting, infrastructure construction, reselling, etc. In order to

give a focus to this report we are only considering wired and wireless services for the

industry analysis. According to the http://www.census.gov the wired and wireless services

have following NAICs: 517110 for Wired Telecommunications Carriers and 517210 for

Wireless Telecommunications Carriers (except Satellite). According to the same site,

these NAICs encompass following activities.

517110 WIRED TELECOMMUNICATIONS CARRIERSThis industry comprises establishments primarily engaged in operating and/or

providing access to transmission facilities and infrastructure that they own and/or lease for

the transmission of voice, data, text, sound, and video using wired telecommunications

networks. Transmission facilities may be based on a single technology or a combination

of technologies. Establishments in this industry use the wired telecommunications network

facilities that they operate to provide a variety of services, such as wired telephony

services, including VoIP services; wired (cable) audio and video programming distribution;

and wired broadband Internet services. By exception, establishments providing satellite

television distribution services using facilities and infrastructure that they operate are

included in this industry. Illustrative

2 Average monthly Revenue per mobile User

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Examples:

Broadband Internet service providers, wired (e.g. cable, DSL)

Local telephone carriers, wired

Cable television distribution services

Long-distance telephone carriers, wired

Closed circuit television (CCTV) services

VoIP service providers, using own operated wired telecommunications infrastructure

Direct-to-home satellite system (DTH) services

Telecommunications carriers, wired

Satellite television distribution systems

Multichannel multipoint distribution services (MMDS).

517210 WIRELESS TELECOMMUNICATIONS CARRIERS (EXCEPTSATELLITE)This industry comprises establishments engaged in operating and maintaining

switching and transmission facilities to provide communications via the airwaves.

Establishments in this industry have spectrum licenses and provide services using that

spectrum, such as cellular phone services, paging services, wireless Internet access, and

wireless video services. Illustrative

Examples:

Cellular telephone services

Wireless Internet service providers, except satellite paging services, except satellite

Wireless telephone communications carriers, except satellite

MARKET SIZE (SALES)According to (http://www.telco2research.com, n.d.), there is an approximately amount

of 60 billion calls and data calls per quarter distributed between the major country

operators. Considering that the market is almost saturated, we can consider that there is

approximately a market of 250 to 300 billion calls and data calls to be distributed in the

market.

Telecom Industry - Revenues, Profits, EBIT and Net Income2015 2014 2013 2012

REVENUE 345,006 324,590 290,613 262,999PROFIT (EBITDA) 108441 88700 97886 73424EBIT 60370 44294 56324 35634EBT 44600 31735 45659 26300NOPAT (Net Income) 28250 23646 30475 25012

Table 1-Telecom Industry - Revenues, Profits, EBIT, EBT and Net Income

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Figure 7-Telecom Industry - Revenues, Profits, EBIT, EBT and Net Income

SALES GROWTH RATEThe sales growth rate is approximately 5% by the end of 2015. After an extraordinary

performance of T-Mobile in 2013, this company has started to fall to peer rates. AT&T has

had an extraordinary performance in 2015. Sprint is the lowest growth rate in the industry.

Verizon did not have considerable growth rates changes.

Figure 8-Telecom Industry Sales Growth Rate (%)

STAGE OF THE LIFE CYCLE (OF THE INDUSTRY)According to (Blau, Gavan, 2016), the industry is in mature state. Indicators that

confirm this are: the growth rate less than GDP, the market has totally accepted the

product and the saturation of the market.

050,000100,000150,000200,000250,000300,000350,000400,000

2015201420132012

Telecom Industry - Sales, Profit and Net Income(USD Millions)

REVENUE PROFIT (EBITDA) EBIT EBT NOPAT (NI)

6%

7%

8%

9%

10%

11%

12%

201520142013

Telecom Industry Sales Growth Rate (%)

SALES REVENUES

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Figure 9-Telecom Industry Life Cycle Stage

TYPE OF PRODUCTS SOLDA variety of products is offered segmented by wireless, residential, businesses (small

and large) and government customers. Wireless service is composed of smartphones

sales and plan sales. Residential services consist of IP or ADSL Internet access, IP TV or

legacy TV, fixes lines and IoT3. Business services is more solution oriented, like, cloud

warehouses4, lease of lines and IT5 solutions. Solutions for government encompass

universities, federal and local governments and communities (smart cities, security, etc.).

VARIATIONS IN SALESTelecom Industry sells many products and services. However, their main sales are

3 Internet of Things, a technology that assigns an IP to any device in order to be

manipulated through internet.4 Cloud warehouses are virtual spaces that can be rent.5 Information Technology.

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monthly subscriptions in order to have access to data and voice services. These sales are

not affected neither by business cycles nor by seasonality since humans want to be always

connected. Nevertheless, we can say that they are event oriented. There is an increase of

subscription sales during special events however, New Year, Christmas and Thanks Given

due to promotions offered. Another important information is the increase of data and voice

calls during events like earthquakes, tornados, natural disaster, strikes, riots, etc. This

represented profits before but with the trends toward flats rates, it is no more that

important.

Figure 10-Telecom Industry - Variation in Sales from year to year (USD Millions)

PROFIT MARGINSThe average profit of the industry is 26.6%. This profit is after discounting COGS6 and

SGA and not taking in count Depreciation, Depletion and Amortization.

6 Cost of Goods Sold

05,00010,00015,00020,00025,00030,00035,00040,000

201520142013

Telecom Industry - Variation in Sales from yearto year (USD Millions)

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Figure 11-Telecom Industry - Profit Margins (USD Millions)

SCOPE OF RIVALRYThis is an industry with high barriers of entrance and a necessity of economies of

scales. Low prices are provided mainly with vertical integration through merges,

acquisitions and sales. There are also FCC7 regulations that avoid distort of the market for

any national or foreign company. Due to this nature of business, Telecom Industry has a

global and national scope of rivalry who compete in the wired and wireless market. The

scope of this report is about telecom industry in USA in the wireless market.

KEY COMPETITORS IN THE INDUSTRYVerizon and AT&T are the only American operators that compete globally in the

telecom industry. These companies are continuously searching for opportunities to

synergize its strength overseas joining, buying or being partially owners of overseas

companies. The biggest telecom operators of the world are showed below.

TELECOM INDUSTRY - GLOBAL COMPETITORS2015

Revenues Profits No of usersAmerica Movil (AMX) 51.78 1.92 285.5Orange (ORAN) 43.71 2.67 263Telecom China 50.83 3.08 450Telefonica (TEF) 51.29 3.11 246.9Vodafone (VOD) 40.97 2 446Deutsche Telekom (DTEGY) 62.69 3.69 156.4China Mobile Limited (CHL) 102.9 16.66 826

7 Federal Communications Commission

0

20000

40000

60000

80000

100000

120000

2015201420132012

Telecom Industry - Profit Margins (USD Millions)

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Nippon Telegraph & Telephone (NTT) 102.68 5.2 66.6Verizon Wireless (VZ) 131.62 46.5 140.1AT&T (T) 146.8 49.5 128.64

Table 2-TELECOM INDUSTRY - GLOBAL COMPETITORS

Figure 12-TELECOM INDUSTRY - GLOBAL COMPETITORS

Verizon, AT&T, T-Mobile and Sprint are the only telecom companies competing in a

national level. Verizon and AT&T with national based capital. The other two competitors

have foreign capital owners: Sprint owned by Japanese Softbank and T-Mobile owned by

German Deutsche Telekom.

Between these competitors, it is almost impossible to have a merge or acquisition due

to FCC regulations (FCC already banned a purchase of T-Mobile by AT&T). Nevertheless,

is it possible a merge between the two smallest operators T-Mobile and Sprint.

Telecom Industry – USA Total Revenues (USD Millions)2015 2014 2013 2012

REVENUE 345,006 324,590 290,613 262,999Table 3-Telecom Industry, USA Total Revenues in USD Millions

0100200300400500600700800900

Telecom Industry - Global Competitors (Revenues and Noof users in Millions)

2015 Revenues 2015 No of users

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Figure 13-USA National Competitors

Additionally, it exists several resellers who neither deploy nor own telecom

infrastructure. They just lease infrastructure from one of the four operators (Verizon, AT&T,

T-Mobile or Sprint) and offer subscription in some specific niches. In some cases, they

belong to the operator like METROPCS who belongs to T-Mobile, and in others, they are

a completely separate company like VIRGIN who works with Sprint. These resellers are

known as MVNOs8. They are considered ‘virtual’ companies due to their lack of

infrastructure.

We are not taking in consideration MVNOs in this report, since they do not contribute

significantly to the industry. Nevertheless, you can find a list of US resellers here:

https://en.wikipedia.org/wiki/List_of_United_States_mobile_virtual_network_operators

8 Mobile Virtual Network Operators

020,00040,00060,00080,000

100,000120,000140,000160,000

2015 2014 2013 2012

Telecom Industry USA National Competitors (USDMillions Sales Revenues)

Verizon AT&T T-Mobile Sprint

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Table 4-Examples of MVNO's in USA

1.2KEY SUCCESS FACTORS (KSF) FOR THE INDUSTRY

AVAILABLE CAPITAL FOR INVESTMENTCompanies should always be ready to make huge investment either in new

technologies, merge or acquisitions. Telecommunication business is capital intensive;

then, cash or access to funds must be available to renew or maintain assets, acquire

companies, radio spectrums or launch promotions. It is also important the quality of the

debt so they can arrange funds to a good rate.

Figure 14-Telecom Industry - Cash, Investment and Financing (USD Millions)

-100,000

-50,000

0

50,000

100,000

150,000

2015201420132012

Telecom Industry - Cash, Investment andFinancing (USD Millions)

CASH INVESTMENT FINANCING

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Table 5-Debt Categorization in the Industry

ABILITY TO DETECT TRENDS AND IMPLEMENT NEW TECHNOLOGIESCompanies must not only detect trends in advance, but also must have the ability to

implement those trends in the correct timing. This is an industry with frequent technology

turnover due to the increasing demand of services that require more bandwidth. This

turnover implies a change of technology every number of years. Telecom industry started

with fixed lines that transmitted only voice through copper networks. Copper cables laid in

poles. This have change radically since the discovery of wireless technology. From the

first telecom services with 1G, 2G, 2.5G and 3G9 technology, the industry is moving fast

to all-digital networks or what is technically known as all IP10 networks. They are still

providing fixed phone lines and internet access through landlines (which uses copper and

ADSL technology), and they are still providing mobile internet, SMS11 and voice with 2G,

2.5G and 3G networks. Nevertheless, that will end in the long-term. Companies like

Verizon, are selling or replacing all those assets that are not integrated with their future

all-IP network. That includes landlines, which for example have been sold to Frontier.

AT&T has not sold yet its landline assets, but surely will do in the future. Operators does

not want to spend cash and time in business that are not integrated with their digital

business. This is how technology shapes telecom industry. The industry is moving fast to

a fiber optic network platform in order to provide the bandwidth that new services need.

They need a huge amount of cash for these changes. Only some operators have the

capacity to do those investments without taking a high risk, and those operators are AT&T

and Verizon. Al the operators are moving fast to the implementation of the new standard:

9 1G, 2G, 2.5G, 3G, 4G and 5G are mobile standards defined in 3GPP and 3GPP210 Internet Protocol11 Short Message Service

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4G LTE12. The older technologies, which are not all-IP, will be shut down most probably

by the end of the decade. They are also preparing the future to the 5G standards. In this

sense, the industry is investing tough to implement 4G LTE networks. Some of the

companies like AT&T and T-Mobile are branding 3G HSPA as 4G technology,

nevertheless, they are already moving to 4G LTE. Verizon and Sprint, which were using

3G-CDMA are also moving fast to 4G LTE. In this way, in the near future, it will be common

to buy an unlocked handset and use it with any of the four operators. There will have no

sense to attach a customer to a contract since, there is already an operator like T-Mobile

that does not do that and is taking many customers from rivals. Incomes from data calls

are already more critical than incomes for legacy calls and that is why operators will give

unlimited calls and SMS for any plan. In the future, who gives more bandwidth for less

price and a quality service will capture most of the market as it is happening already with

T-Mobile with the so-called uncarrier strategy. Operators must identify all these changes

and change their strategies accordingly in order to keep subscribers loyal and most

important keep themselves in the market.

Figure 15-From 1G to 5G

VERTICAL INTEGRATION AND ECONOMIES OF SCALEIn order to be competitive in price, companies must have economies of scale. In

telecom industry, they get economies of scale merging with other companies, acquiring

companies that are aligned with the company strategy and selling those business units

that are not. They can also get economies of scales spreading costs in a big numbers of

subscribers, and in order to do that, they must make huge assets investments and

expenses in order to cover in not only metropolitan areas but also rural and suburban

12 4G LTE is the 4G Long-Term Evolution, the last standard deployed by 3GPP

association

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areas.

Integrate other businesses aligned with the company strategy means to merge or

acquire another company that have some asset that is valuable for the strategy like

spectrum, anthems and subscribers. The company can acquire those assets, merge with

another company or sell some others that are obsolete or not aligned with company

strategy.

To sell business units means that company should not spend cash in growing or

keeping business units that do not give benefit to the company or are not aligned with the

company strategy. For example, Verizon is selling its landline business to frontier in places,

which are not geographically integrated with its fiber optic network.

Telecom wireless industry is in the maturity life cycle stage as we mention before,

consequently, the market is saturated. Operators must take subscribers from others

operators through pricing plan promotions and subsidized mobile promotions. A major

strategy that is working well is the “uncarrier” strategy launched by T-Mobile in 2013.

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TELECOMMUNICATION ASSETSIn order to implement offer services to clients, telecom operator must have a proper

platform to support those services. Those assets in telecom industry are fiber optic

network, tower stations, radio spectrum frequencies and equipment. Traditional copper

network with ADSL13 technology is not more important and is not considered in this report.

Companies like Verizon and AT&T co-own international submarine fiber optics assets,

and national fiber optic networks, this give them a huge advantage over competitors to

decrease costs. Old copper networks are still important in rural areas, but they are being

replaced or sold to third parties. A list of fiber optics co-owned by Verizon and AT&T can

be found here: http://www.submarinecablemap.com/#/

Figure 16 - Submarine Fiber Optics connected to US

13 asynchronous digital subscriber line

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Table 6 - Biggest Fiber Optic Providers in USA

Tower stations (Anthems and BTSs14) means coverage. The more coverage a

company can have the more subscribers they can serve. All competitors are making the

transition to 4G LTE technology. Meanwhile, they are still serving the market through a

mix of technologies of 2G, 3G and 4G LTE.

14 Base Transceiver Stations

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Figure 17-Tower sites per County per density

The spectrum is another important resource in the wireless industry. This is a scarce

resource distributed through biddings by the FCC. Operators, assigned big part of their

investments to acquire spectrum. The low frequency spectrum is the more valuable due

to technical characteristics of interference support.

Figure 18-Radio Spectrum distribution in the USA Industry

The faster way to obtain any of the assets described above is through merge and

acquisitions. Merge and acquisitions need the approval of the FCC. However, if purchase

Page 27

is not possible, the only way is to assign considerable budget for annual CAPEX15

expenses.

Subscribers is a scarce and valuable asset in the industry. This resource generates

the incomes of the company. Subscribers are lost to other companies for promotions in

other companies or bad service. More subscribers mean more sales.

Telecom Industry - Number of Subscribers2013 2014 2015

No of subscribers 333.42 362.96 389.92Table 7-Telecom Industry, Numer of suscribers

Figure 19-Teleco Industry, Number of subscribes

1.3PORTER’S 5 FORCES ANALYSIS

THREAT OF NEW ENTRANTS – HIGHIt is very difficult to come into the telecom industry for several reasons. One of the main

reasons is the amount of investment to cope with actual infrastructure of existing operators.

Nevertheless, they are some content companies that are trying to go into this industry in

the following years like Google and Facebook. They are in their way to create their own

fiber optic network and Google is already offering a content service with its own network

in 18 cities.

15 Capital Expenses

300.

310.

320.

330.

340.

350.

360.

370.

380.

390.

400.

2013 2014 2015

Telecom Industry - Number of subscribers

Page 28

BARGAINING POWER OF BUYERS – HIGHIn this Industry, the bargaining power of buyers16 is high since they can switch easily

to other operators. Subscribers usually shift to another provider due to subsidized handset

promotions, unsatisfied service or prices plan promotions.

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES - HIGHThe threat of substitute for products or services in the telecom industry is high. Every

so often, new products challenge the existence of actual products and services. This is an

industry where a very profitable service can be replaced in a relative short period.

Operators are aware of this and are trying to offer diffentiated products and service every

so often. Most profitable business unit is being wireless. For instance, wireless networks

has been successively replaced by 2G, 2.5G, 3G and 4G LTE networks. In the near future,

they will be replaced by 5G, which will bring new services, and it will continue changing for

sure in the long-term.

Figure 20 - New services to be provided with 5G technology

BARGAINING POWER OF SUPPLIERS - LOWTelecom equipment vendors17 are responsible for supplying the appropriate and last

16 Buyers are referred here as the mobile subscribers being a person a company or

some governmental institution.17 Telecom equipment vendors are responsible of providing the equipment, products

and services to telecom operators. Some known telecom vendors are Huawei, Cisco,

Page 29

technology to the telecom Industry. Telecom vendors have economies of scale and

specialization since they sell the same products to any operator in the world. Providers

offer similar products to vendors, for that reason, they work on sale strategies like prices,

short-lists or large scale contracts in order to apply economies of scale. Short-lists by

product oblige vendors to price less. Additionally, vendors from China frequently sell

subsidized products, which make more difficult the bargain. Finally, telecom vendors join

together in order to design standards and features for the industry like 3G, WCDMA18,

CDMA, 4G LTE and 5G. They are represented in organizations like 3GPP19 and 3GPP2,

which, with the agreement of telecom vendors decide how and when to deploy every

technology in the market. Since these standards are for the whole industry, that also make

possible an easy integration from different vendors making the power of suppliers low.

1.4MACRO ENVIRONMENTAL TRENDS

Legal and regulatory institutions influence the industry in order to avoid monopolies

and to generate radio spectrums biddings. Economic and Demographic growth increase

the number of subscribers bringing the necessity of more radio spectrum. Social trend

affect this industry in the sense that with every change of technology there is a number of

employees that are not more necessary and generate conflicts if they are not taken in

count in the future. Ecological trends affect this industry in the sense that there is still the

idea that frequency causes diseases like cancer.

Figure 21-Mobile phone radiation penetrates the brain

Nokia, ZTE, Ericsson, and Alcatel-Lucent.18 Wideband Code Division Multiple Access19 Technical Specifications for a 3rd Generation Mobile System (www.3gpp.org)

Page 30

Figure 22-Verizon Strike

Figure 23-The Federal Communications Commission (FCC)

1.5SUMMARY OF RESOURCES

Opportunitiesand threats for

the industry

VERIZON AT&T T-MOBILE SPRINT

Capital for

investments

18b profit.

39b cash for

investment.

30b invested(18b capex,

4b acquisitions,

10b AWS-3spectrum

13b profit. 36b

cash for

investment.


12b

acquisitions

18b AWS-3

678m profit.

5.4b for

investment.

10binvested (3b

increase,

5b capex,

1.8b AWS-3

2b profit.

4b for

investment.


1b disposal

of fix assets)

Page 31

license). spectrumlicense).

spectrumlicense)

Implementation

of new

technologies

312M personscovered with 4G

LTE network.

111b invested in

4G LTE since

2000.

355M peoplecovered by 4G

LTE network.

312Mpeoplecovered by

4G LTE

network.

300Mpeoplecovered by

4G LTE

network.

Economies of

scale through

merges, joint

ventures,

acquisitions and

sales.

ACQUIREVODAFONE STAKE

IN VERIZON

WIRELESS IN2014(130b),

ACQUIRE AOL in

2015(4.4b),

POSSIBLE YAHOOEMAIL ANDFINANCE in

2017(4.8b), SOLD

landline to FRONTIER2015(3b), and in

2016(8.6b)

ACQUIRECINGULARWIRELESS IN

2006 (86b),

ACQUIREDIRECTV 2014

(48.5b), ACQUIRE

TIME WARNER2016 (85.4b)

Tried to buy T-Mobile in

2014.

Potentialmerge with T-Mobile in

2017.

Subscribers

Database

143M 132M 68M 58M

Fiber optic asset 32M coverage in

USA. Co-owner of

international fiber

optic networks.

2.5M coverage

in USA. Co-

owner of

international

fiber optic

networks.

No coverage No

coverage

Mobile coverage 305M 306M 246M 280M

DSL networks 50M 122M No coverage No

coverageTable 8-Summary of resources

Page 32

2. PART2 – INTERNAL / COMPANY ANALYSIS

2.1ASSESS PERFORMANCE

GENERIC STRATEGYAs stated in the letter from the CEO20, regarding the balance of 2015-year end, the

strategy of the company is based in the following three tiers.

1. Deliver of wireless and wired services over their superior network infrastructure.

2. Develop new business models in platforms such as video and the Internet ofThings.

3. Create incremental revenue opportunities in applications and content.

HOW WELL DOES THE COMPANY MEET THE KEY SUCCESS FACTORS

AVAILABLE CAPITAL FOR INVESTMENTVerizon is developing well in this tier with a clear strategy of improving its credit rating

(A++) and increasing the cash flow for investments. This payment was an urgent matter

to Verizon since after the re-purchase of the 45% actions from Vodafone its credit rating

was downgrading in the main agencies making expensive the fund access for new

investments. Verizon had an EBIT21 of 28 billion in 2015 end-year with and added to the

possible improve of rating for 2016 we can predict that they will have a huge capital

available for investment in the next year.

ABILITY TO DETECT TRENDS AND IMPLEMENT NEW TECHNOLOGIESVerizon is doing relative well in this tier. Verizon has implemented different ways to

detect industry trends. Its main strategies is being the implementation of platforms in order

to let developers make their own solutions, as they are the facilitators of the platform, they

can later use these solutions on its favor. The other strategy is to invest hard in video

solutions; since they have detected that access to video will be the trend in the future.

Another strong strategy is the investment in the Internet of Things, which is creating a new

niche of revenues. Last, they are pushing the use of their strong infrastructure All-IP (All

Internet) and Fiber Optic access. They have implemented FIoS22 service with this purpose.

Nevertheless, Verizon, must concern about low penetration of the FIoS service and the

fact that FIoS business unit is not being as profitable as wireless. Finally, Verizon should

contemplate if they invest more on content because their investments have been low

20 Chief Executive Officer21 Earnings Before Interest and Taxes22 Internet, TV and Fix Phone service through optical routers and fiber optical networks

Page 33

compared with its peer AT&T.

ECONOMIES OF SCALE AND VERTICAL INTEGRATIONVerizon has been doing well in the strategy of getting economies of scale and vertical

integration. Economies of scale through merges or acquisitions of peer companies like

AT&T, T-Mobile or Sprint are almost impossible due to FCC rules. It is expected that the

FCC will not authorize any merge between big operators. Verizon is trying to bring content

to its wireless infrastructure. Is in this direction that Verizon has acquire AOL Time Warner

in 2015 and is trying to buy Yahoo email and Yahoo finance from Yahoo this year or maybe

next year. In this direction is also oriented its strategy to develop new applications (mainly

for video content) and for the so-called Internet of Things. If this strategy proves to be right,

Verizon will continue with the purchase of content companies and developing of content

services.

TELECOM ASSETSVerizon is doing well in Telecom Assets. Verizon is the first in submarine fiber optics

and have the biggest coverage in terrestrial fiber optic network. Additionally, Verizon has

the second best wireless coverage in non-rural and rural areas after AT&T.

Figure 24-Wireless coverage non-rual and rural

Verizon also has the best 4G LTE coverage in rural areas and the second best

coverage in non-rural areas after AT&T.

Page 34

Figure 25-LTE Coverage non-rural and rural

Verizon has the second download speed in 4G LTE after T-Mobile. 4G LTE will be the

only standard to be implemented in USA in the following years. All the operators are

planning to shut down the other technologies by the end of the decade.

Figure 26-LTE Speed by service provider

2.2BRIEF DESCRIPTION OF THE COMPANY

As describe in its website: “Verizon Communications Inc. is a holding company that,

acting through its subsidiaries, is one of the world’s leading providers of communications,

information and entertainment products and services to consumers, businesses and

governmental agencies with a presence in the United States and around the world”

WHAT THE COMPANY DOES (WHAT ARE ITS PRODUCTS OR SERVICES)As its report states: Verizon offers voice, data, video services and solutions on their

wireless and wireline networks that are designed to meet customers’ demand for mobility,

reliable network connectivity, security and control. They have two reportable segments,

Wireless and Wireline. Their wireless business operates as Verizon Wireless, provides

Page 35

voice and data services and equipment sales across the United States (U.S.) using one of

the most extensive and reliable wireless networks. Their wireline business provides

consumer, business and government customers with communications products and

enhanced services, including broadband data, video, corporate networking solutions, data

center, cloud services, security, managed network services, local, and long distance voice

services. Verizon also owns and operates one of the most expansive end-to-end global

Internet Protocol (IP) networks in the world”.

For a more detailed list of services provided by the company (wireless and wireline),

please check the following page:

(http://www.reuters.com/finance/stocks/companyProfile?symbol=VZ, n.d.)

WHO CUSTOMERS AREThe customers of Verizon are normal persons, small businesses, large businesses and

government. Verizon has developed a portfolio of products for all of them.

WHERE THEY OPERATEVerizon operates in 150 locations around the globe.

Figure 27-Verizon offices in the world

A list of offices can be found in the following link:

http://www.verizon.com/about/careers/we-are-global

Page 36

FIRM SIZE (SALES AND NUMBER OF EMPLOYEES)

Verizon has a workforce of approximately 178,000 employees as of December 31, 2015.

The company is the biggest telecom operator in the world, with annual sales of 131 billion

as per 2015 year-end (http://data.cnbc.com/quotes/VZ/tab/7.2 ). The firm is valued in

203.5 billion as per 2016 3rd quarter end. See: http://data.cnbc.com/quotes/VZ/tab/4 for

more information.

Page 37

YEAR COMPANY FOUNDED & HISTORY GROWTH.According to (https://en.wikipedia.org/wiki/Verizon_Communications, n.d.) : “Verizon was

founded as Bell Atlantic, which was one of the seven Baby Bells that were formed after AT&T

Corporation was forced to relinquish its control of the Bell System by order of the Justice

Department of the United States. Bell Atlantic came into existence in 1984 with a footprint

from New Jersey to Virginia, with each area having a separate operating company (consisting

of New Jersey Bell, Bell of Pennsylvania, Diamond State Telephone, and C&P Telephone).

As part of the rebranding that the Baby Bells took in the mid-1990s, all of the operating

companies assumed the Bell Atlantic name. In 1997, Bell Atlantic expanded into New York

and the New England states by merging with fellow Baby Bell NYNEX. In addition, Bell

Atlantic moved their headquarters from Philadelphia into the old NYNEX headquarters and

rebranded the entire company as Bell Atlantic.

In 2000, Bell Atlantic merged with GTE, which operated telecommunications companies

across most of the rest of the country that was not already in Bell Atlantic's footprint. Bell

Atlantic, the surviving company, changed its name to "Verizon", a portmanteau of VERITAS

(Latin for "truth") and horizon.

As of 2016, Verizon is one of three companies that had their roots in the former Baby

Bells. The other two, like Verizon, exist because of mergers among fellow former Baby Bell

members. One, SBC Communications, bought out its former parent AT&T Corporation and

assumed the AT&T name. The other, CenturyLink, was formed initially in 2011 by the

acquisition of Qwest (formerly named US West).”

HISTORY OF GROWTHI have prepared a summary based in the following article:

(https://en.wikipedia.org/wiki/Verizon_Communications, n.d.).

Formation (2000–2002)Verizon Communications formed in June 2000 when the Federal Communications

Commission approved a US$64.7 billion merger of telephone companies Bell Atlantic and

GTE

2003–2005In June 2003, Verizon Wireless backed an FCC-issued portability requirement that

permitted consumers to take their phone numbers with them across carriers. The company

gained 1.5 million new subscribers the following quarter, partially due to the rule change

Page 38

Verizon launched its FiOS Internet service, which transmits data over fiber optic cables

in Keller, Texas. (Since divested Frontier) The company launched FiOS TV in September

2005, also in Keller, Texas. Twenty percent of qualified homes signed up by the end of the

year.

Verizon began negotiations to purchase long distance carrier MCI in 2005. MCI

accepted the company's initial $6.75 billion offer in February 2005, but then received a

higher offer from Qwest Communications. Verizon increased its bid to $7.6 billion (or

$23.50 a share), which MCI accepted on March 29, 2005. The acquisition gave the

company access to MCI's one million corporate clients and international holdings,

expanding Verizon's presence into global markets. As a result, Verizon Business was

established as a new division to serve the company's business and government

customers. The FCC approved the deal on November 5, 2005, valuing it at $8.5 billion.

Verizon's 2006 revenues rose by as much as 20% following the purchase.

2006-2010Verizon won a lawsuit against Vonage in March 2007 for patent infringement. The three

patents named were filed by Verizon in 1997 and relate to the conversion of IP addresses

into phone numbers, a key technology of Vonage's business. The company was awarded

US$58 million in damages and future royalties. Vonage later lost an appeal and was

ordered to pay Verizon $120 million.

In November 2007, Verizon opened its networks for the first time to third party apps

and devices, a decision that allowed it to participate in the FCC's 2008 700 MHz auction

of "open access" spectrum. During that auction, the company bid $9.4 billion and won the

bulk of national and local licenses for airwaves reaching approximately 469 million people.

Verizon utilized the increased spectrum for its 4G service.

Verizon Wireless purchased wireless carrier Alltel for $28.1 billion in June 2008. The

acquisition included 13 million customers, which allowed Verizon Wireless to surpass

AT&T in number of customers and reach new markets in rural areas

Verizon introduced its 4G LTE network in 38 markets in December 2010, as well as in

airports in seven additional cities.

In 2009, the company spun off wire lines in 14 states into a company that then merged

with Frontier Communications in a deal valued at $8.6 billion.

Page 39

2011–present

In 2011, Verizon acquired Terremark, an information technology services company for

$1.4 billion.

In February 2011, Verizon Wireless began selling the iPhone 4

Ivan Seidenberg stepped down as Verizon's CEO on August 1, 2011. Lowell McAdam

succeeded him

In June 2012, as part of its strategy to expand into new growth areas in its wireless

business, Verizon purchased Hughes Telematics—a company that produces wireless

features for automobiles—for $612 million

In August 2012, the Department of Justice approved Verizon's purchase of Advanced

Wireless Services (AWS) spectrum from a consortium of cable companies, including

Comcast, Time Warner Cable and Bright House Networks, for $3.9 billion

In September 2013, Verizon purchased the 45% stake in Verizon Wireless owned by

Vodafone for $130 billion. The deal closed on February 21, 2014, becoming the third

largest corporate deal ever signed, giving Verizon Communications sole ownership of

Verizon Wireless.

On January 5, 2015, Verizon was said to have approached AOL about a possible

takeover or venture, and on May 12, 2015, Verizon announced they would purchase AOL

at $50 per share, for a deal valued around $4.4 billion

On April 13, 2016, the Verizon strike of 2016 began. Organized by trade unions

International Brotherhood of Electrical Workers and the Communications Workers of

America, this ongoing action involves 40,000 landline and cable workers who have been

without a contract since August 2015

On July 25, 2016 Verizon agreed to purchase Yahoo!'s operating business for $4.83

billion

On August 1, 2016, Verizon announced to buy Fleetmatics, a fleet telematics system

Page 40

company in Dublin, Ireland, for $2.4 billion, to build products that it offers to enterprises for

logistics and mobile workforces.

On September 12, 2016, Verizon announced it was acquiring Sensity, a startup for

LED sensors, in an effort to bolster its IoT portfolio

In October 2016, Verizon was accused by Communications Workers of America of

deliberately refusing to maintain its copper telephone service. The organization released

internal memos and other documents stating that Verizon workers in Pennsylvania were

being instructed to, in areas with network problems, migrate voice-only customers to

VoiceLink—a system that delivers telephone service over the Verizon Wireless network,

and not to repair the copper lines.

SUMMARY OF ACQUISITIONSList from (http://listings.findthecompany.com/, n.d.)

9/12/2016 Acquisition Acquires Sensity Systems for an Undisclosed Amount8/1/2016 Alert Verizon agrees to buy Fleetmatics in $2.4 billion deal

7/25/2016 Alert Verizon confirms $4.83 billion buyout of Yahoo7/19/2016 Alert Yahoo reports lackluster earnings results as sale looms6/22/2016 Acquisition Acquires Telogis for an Undisclosed Amount

6/7/2016 Alert Verizon plans to bid $3 billion for Yahoo's primary business2/8/2016 Alert Verizon poised to make a bid for Yahoo

12/9/2013 Acquisition Acquires EdgeCast Networks for an Undisclosed Amount8/25/2011 Acquisition Acquires CloudSwitch for an Undisclosed Amount

3/4/2011 Executive Mr. Lowell C. McAdam assumes the role of CEO5/14/2007 Acquisition Acquires Cybertrust for an Undisclosed Amount

2.3MISSION OF THE COMPANY

According to their webpage (http://www.verizon.com/about/our-company/who-we-are,

n.d.), the mission of the company goes as follow: “Every day, we connect millions of

people, companies and communities with our powerful technology. We are using our

award-winning network to make breakthroughs in interactive entertainment, digital media,

and the Internet of Things and broadband services for customers. Whatever the future

looks like, whatever the digital world promises, we will deliver.”

Page 41

FINANCIAL ANALYSISAs per their balance sheet 2015, they have an EBIT of 30 billion, which they can use

for re-investment in 2016. In their cash flow statement of 2015 also, there is a capital

expenditure of 18 billion. 9.9 billion Per licenses (spectrum auction of 65MHz for Advanced

Wireless Services), and the rest in CAPEX. They cancelled in 2014 the debt for the re-

acquisition of the 45% stock-repurchase from Vodafone paying a record amount 130

billion; this payment was done with 59 billion cash plus 62 billion of common stocks.

Notable aspect of statement of cash flow is the increase of cash flow in 2013, seems,

due to a retrieve from a depression in 2012.

Capital Expenditures is almost constant from 2012 (16 billions) to 2015 (17 billion

approximately). Verizon has been investing strong in fiber optics infrastructure and 4G LTE

to build a robust telecom infrastructure in the United States.

Additionally we can see that there were no important acquisitions in 2012 and 2013.

After the recuperation of 2013, there were acquisitions for 182 million in 2014 (one of the

forward vertical integration companies) and for 3.6 billion in 2015 (AOL acquisition).

Finally, we can see an addition of “other assets” for 9.9 billion in 2015 (the spectrum

auction of 65MHz for Advanced Wireless Services from FCC).

Liquidity of Verizon has decreased in 2015 due to expenses of cash in 2013. In spite

of the expenses in cash, Verizon gross profit has continue growing. Verizon debt to equity

relation has growth due to this huge payment made in 2013. In addition, the relation

EBITDA and EBIT to Interests paid has decreased, which means that Verizon has less

money to pay the interests. Additionally the ROE has increased significantly due to the

increase of the liabilities, which has decrease the equity of the company. Finally, Verizon

has had a constant increase and is now in 8.29%.See Appendix, VERIZON FINANCIAL

RATIOS.

Verizon Market capitalization has been doing well since 2010. Shares prices had a

growing trend and it should continue to be like that. T-Mobile, share price has go down

from 2016 Q3 but it is expected to retake its value by the near future when market stabilize.

The same with AT&T. Sprint has started to invest in order to catch up the rest of operators.

Page 42

Figure 28 – Comparison VZ with Sprint (S), AT&T (T) and T-Mobile (TMUS) – Source: cnbc.com

Verizon market price has been performing better than SP&500, NASDAQ Financial

and NASDAQ Telecommunication indices.

Figure 29 – Comparison VZ with SP&500(SPX), NASDAQ Financial (IXF) and NASDAQTelecommunication (IXUT) – Source: cnbc.com

BENCHMAR WITH COMPETITORSWith 131 billion of revenue, Verizon has the second greatest revenue in the industry.

This revenue encompass wireless and wired business. AT&T revenues are 146 billion also

with wireless and wired business. T-Mobile and Sprint fall a little behind since the revenues

are mostly for wireless business.

Telecom Revenue by Operator2015 2014 2013 2012

Verizon 131,620 127,079 120,550 115,846AT&T 146,801 132,447 128,752 127,434T-Mobile 32,053 29,564 24,420 19,719Sprint 34,532 35,500 16,891TOTAL REVENUE 345,006 324,590 290,613 262,999

Table 9-Telecom Revenue by Operator

Page 43

Figure 30-Telecom Revenue by Operator

Verizon and AT&T sales growth has decreased in 2015. T-Mobile sales growth has

increased in the same period.

TELECOM INDUSTRY SALES GROWTH PERCENTAGE2015 2014 2013

Verizon 3.57% 5.42% 4.06%AT&T 10.84% 2.87% 1.03%T-Mobile 8.42% 21.06% 23.84%Sprint -2.73%AVERAGE 5.03% 9.78% 9.64%Table 10-TELECOM INDUSTRY SALES GROWTH PERCENTAGE

Figure 31-TELECOM INDUSTRY SALES GROWTH PERCENTAGE

Verizon has the best EBIT23 followed by AT&T. T-Mobile and Sprint does not have

significant EBIT, they consume all the earnings paying interest and taxes.

Telecom Industry - EBIT

23 Earnings Before Interest and Taxes

0

50,000

100,000

150,000

200,000

2015201420132012

TELECOM INDUSTRY - REVENUE (USDMillions)


-10.00%

0.00%

10.00%

20.00%

30.00%

201520142013

TELECOM INDUSTRY - SALES GROWTHPERCENTAGE

Verizon AT&T T-Mobile Sprint AVERAGE

Page 44

2015 2014 2013 2012Verizon 30,550 26,706 25,458 21,006AT&T 27,497 14,819 30,479 12,997T-Mobile 1,672 581 1,048 1,631Sprint 651 2,188 -661

Table 11-Telecom Industry – EBIT

Figure 32-Telecom Industry - EBIT

Verizon has the highest interest to be paid. AT&T has the second highest.

Nevertheless, in relation with the level of debt they have this is relative low. T-Mobile and

Sprint has a relative high interest to pay in relation with the debt acquire.

TELECOM INDUSTRY INTERESTS2015 2014 2013 2012

Verizon 6,088 5,667 4,175 3,383AT&T 5,714 4,081 4,508 3,970T-Mobile 1,726 1,513 1,233 679Sprint 2,051 2,064 918 0

Table 12-Telecom Industry - Interests

Figure 33-Telecom Industry - Interests

-5,00005,00010,00015,00020,00025,00030,00035,000

2015201420132012

TELECOM INDUSTRY - EBIT (USD Millions)


0

2,000

4,000

6,000

8,000

2015201420132012

TELECOM INDUSTRY - INTEREST (USDMillions)


Page 45

Verizon and AT&T has paid the higher taxes to pay. Taxes of T-Mobile are low, and

Sprint had more deferred taxes than paid taxes in 2015.

TELECOM INDUSTRY TAXES2015 2014 2013 2012

Verizon -9,865 -3,314 -5,730 660AT&T -7,005 -3,619 -9,224 -2,900T-Mobile -245 -166 -16 -350Sprint 574 -224 -45 0

Table 13-Telecom Industry - Taxes

Figure 34-Telecom Industry - Taxes

After paying Interest and Taxes, Verizon and AT&T still keep 14.6 and 14.8 billion

respectively. On the other side, after paying Interest and Taxes, no money is left for T-

Mobile and Sprint.

TELECOM INDUSTRY NOPAT24

2015 2014 2013 2012Verizon 14,597 17,725 15,553 18,283AT&T 14,778 7,119 16,747 6,127T-Mobile -299 -1,098 -201 602Sprint -826 -100 -1,624 0

Table 14-Telecom Industry - NOPAT(Net Income)

24 Net Operation Profits After Taxes, equivalent to Net Income

-12,000-10,000-8,000-6,000-4,000-2,00002,000

2015201420132012

TELECOM INDUSTRY - TAXES (USD Millions)


Page 46

Figure 35-Telecom Industry, NOPAT (Net Income)

Verizon has the highest has the highest operating cash of the industry together with

AT&T. This cash is mainly spent in CAPEX operations and acquisitions. T-Mobile and

Sprint does not have enough operating cash for CAPEX and acquisitions.

TELECOM INDUSTRY OPERATING CASH2015 2014 2013 2012

Verizon 38,930 30,631 38,818 31,486AT&T 35,880 31,338 34,796 39,176T-Mobile 5,414 4,146 3,545 3,862Sprint 2,450 522 -61 0

Table 15-Telecom Industry, Operating Cash

Figure 36-Telecom Industry, Operating Cash

Verizon has paid a big amount of its debt acquired when they bought the 45% stake of

Vodafone over Verizon Wireless. They were worried about the categorization of the debt.

The payment has been bigger than the investment in 2015 that is why it appears as a

-5,000

0

5,000

10,000

15,000

20,000

2015201420132012

TELECOM INDUSTRY - NOPAT/Net Income(USD Millions)


-10,000

0

10,000

20,000

30,000

40,000

50,000

2015201420132012

TELECOM INDUSTRY - OPERATING CASH (USDMillions)


Page 47

negative financing. On the other side, AT&T, T-Mobile and Sprint have recurred to a

financing of 9.7, 3.4 and 1.3 billion respectively.

TELECOM INDUSTRY FINANCING2015 2014 2013 2012

Verizon -15,015 -57,705 26,450 -21,253AT&T 9,782 -7,737 -13,201 -17,673T-Mobile 3,413 2,524 4,044 57Sprint 1,304 -160 24,528 0

Table 16-Telecom Industry, Financing

Figure 37-Telecom Industry, Financing

In the table below, we can see the revenues corresponding exclusively to wireless

services. These values are useful to calculate the ARPU25 of the companies.

Service Revenues for Mobile Wireless Service2011 2012 2013 2014 2015

Verizon Wireless 59,157 63,733 69,033 72,630 70,396AT&T 56,726 59,186 61,552 61,032 59,837Sprint 27,390 29,086 29,263 27,959 25,845

T-Mobile 18,481 17,213 20,535 22,375 24,821Table 17-Service Revenues for Mobile Wireless Service

25 Average Revenue per User. The average monthly payment of a subscriber for

services rendered.

-70,000-60,000-50,000-40,000-30,000-20,000-10,000010,00020,00030,00040,000

2015201420132012

TELECOM INDUSTRY - FINANCING (USD Millions)


Page 48

Figure 38-Service Revenues for Mobile Wireless Service

Verizon has the highest ARPU in the industry. T-Mobile has the smallest ARPU in the

industry. Verizon, still has margin to decrease prices in order to keep customer price

satisfaction, although, this major value could be because of the higher quality coverage of

the company.

TELECOM INDUSTRY - ARPU (monthly)2013 2014 2015

Verizon Wireless 47 46 42AT&T 46 42 39Sprint 44 42 37

T-Mobile 37 34 33Average 43.71 40.99 37.63

Table 18-Telecom Industry, ARPU

Figure 39-Telecom Industry, ARPU

Verizon, AT&T and T-Mobile were the leaders in addition of new subscribers in 2015.

0

20,000

40,000

60,000

80,000

2007 2008 2009 2010 2011 2012 2013 2014 2015

Service Revenues for Mobile Wireless ServiceProviders ($ millions), 2007–2015

Verizon Wireless AT&T Sprint T-Mobile

3032343638404244464850

2013 2014 2015

Telecom Industry - ARPU (Monthly)

Verizon Wireless AT&T Sprint T-Mobile Average

Page 49

In the last quarter of 2015, Verizon was the only operator that grew in this number.

Figure 40-Quarterly net adds (USD Millions)

Verizon and AT&T has the lowest Churn26 in the industry. T-Mobile has the highest

churn; most probably due to coverage are problems. Sprint has the second worst churn

rate in the industry.

26 Percentage of subscribers to a service who discontinue their subscriptions per month

Page 50

Figure 41-Churn (average monthly)

2.4VRIO ANALYSIS

Resources available in Verizon for VRIO analysis.

SUBSCRIBERS DATABASEVerizon has the biggest database in the market in terms of post-paid and pre-paid

subscribers. The coverage and reliability of the services offered by Verizon are very

important, in that sense; they have a high loyalty rate, which can only break due to

aggressive promotions, discounts or subsidized mobiles offered by competitors. Verizon

database will increase in 500 million subscribers in case the purchase of Yahoo is finally

due. With such a base subscription database, Verizon will be ready to take better decision

about its clients, since; they will have enough information to offered adequate services to

their subscribers.

Telecom Industry - Number of SubscribersVerizon Wireless AT&T Sprint Nextel T-Mobile USA TOTAL

2013 121.31 110.38 55.05 46.68 333.422014 131.89 120.55 55.5 55.02 362.962015 140.1 128.64 57.9 63.28 389.92

Table 19-Telecom Industry, Number of Subscribers

Page 51

Figure 42-Telecom Industry, Number of Subscribers

COVERAGEVerizon has one of the biggest coverage in the US together with AT&T and Sprint. This

puts the company in a privileged situation in order to exploit their resources with new

subscribers or even leasing the access to other companies to obtain extra-revenues.

CAPITAL INVESTMENTVerizon had the second capital investment in 2015. Investment is due in CAPEX27

(maintenance and equipment) and acquisition of companies and radio spectrum. The

biggest investor has been AT&T with 49 billion, also invested in CAPEX, acquisitions and

radio spectrum. Most of the investment of T-Mobile and Sprint are only for CAPEX.

TELECOM INDUSTRY INVESTMENT2015 2014 2013 2012

Verizon 30,043 15,856 14,833 20,502AT&T 49,144 18,337 23,124 19,680T-Mobile 9,560 7,246 2,092 3,915Sprint 4,714 1,756 18,108 0

Table 20-Telecom Industry Investment

27 Capital Expenditure

0.

20.

40.

60.

80.

100.

120.

140.

160.

2013 2014 2015

Telecom Industry - Number of Subscribers

Verizon Wireless AT&T Sprint T-Mobile

Page 52

Figure 43-Telecom Industry, Investment (USD Millions)

HUMAN RESOURCESVerizon hast more than 170,000 employees, this allows them to create a great synergy

for the projects they have to implement. They spend more than 300 million of dollars in

training every year, which create a very specialized workforce. More than that, the actual

CEO comes from the mobile world and that is a strong message of what directions the

company will take. Wireless services is a very dynamic market with constant promotions

and discounts, loyalty programs has to be implemented every so often. This goes through

processes in Marketing, Design, Quality and implantation that has to work to deliver the

services on time. This work force is very valuable in order to keep the company

competitive.

ASSETSVerizon of assets are very strong. They have a fiber optic network through not only the

US but also the world. They have a huge installation of anthems already with the 4G LTE

technology and in the coming years to be upgraded to 5G. Their assets are so strong that

they lease to some other small operators under agreement with the FCC.

PRODUCT PORTFOLIOVerizon has a strong portfolio with products developed for themselves or owned

through acquisitions. Their product portfolio includes services for medium, large

companies and government.

SUMMARY OF VRIO ANALYSIS

0

10,000

20,000

30,000

40,000

50,000

60,000

2015201420132012

TELECOM INDUSTRY - INVESTMENT (USDMillions)


Page 53

Resource Valuable Rare Costly toimitate

Exploited Competitiveimplications

Fiber optic network Y Y Y N Sustained Competitive

advantage

3G CDMA EVDO

assets

Y N N Y Temporary

Competitive Parity

4G assets Y N Y Y Competitive parity

Network coverage Y N Y Y Sustained Competitive

advantage

Radio spectrum Y Y Y N Sustained Competitive

advantage

Product portfolio Y N N Y Competitive parity

Capital expenditure

capacity

Y Y Y N Sustained competitive

advantage

Subscribers

database

Y Y Y N Sustained competitive

advantageTable 21-VRIO Analysis Verizon

3. PART3 - RECOMMENDATIONS

After a complete analysis of the industry and the company, following issues are

found: political problems due to change of technologies, problems with yahoo

purchase and low diversification of offered content.

3.1CRITICAL STRATEGIC ISSUES FACING THE FIRM

POLITICS DUE TO CHANGE OF TECHNOLOGYAs we mention before, Economies of Scale is one of the Key Factors for a

company in the Telecom Industry. Cyclically, companies in the sector have to

implement new technologies in order to improve the quality of the service and

decrease costs. The staff of the company do not frequently understand these

changes. Most of them would like to continue working with the same technologies

in which they have skills. Unhappily, there is a point where it is impossible to

continue working with the same technologies. Verizon has been switching is

technologies from ADSL to Fiber Optic and from 2G and 3G to 4G LTE. This has

created conflicts between unionized workers and the heads of the company. The

employees of Verizon resist switching wired solutions to wireless solutions as

Page 54

stated by managers. This creates strikes and political problems that decrease

revenues due to the stop of the service for some days. Skills of some workers

become obsolete in the strategy the company is following. Some of them receive

training in the new technology and some do not. Verizon is investing hard in new

technologies and they have to push the use of this new technology. There have

been explicit directives to change from copper to fiber optic or from landline to 4G

LTE when some subscriber get a problem. Worker have denounced that as a

strategy of Verizon to lay off the old technologies. (Raymond).

PROBLEMS WITH YAHOO PURCHASEThere are problems to complete the planned purchase of yahoo email and

yahoo finance. Yahoo has confirmed that 500 million of account where breach and

this has had an impact on the transaction. It is still expected that Verizon complete

the purchase of yahoo assets at some discount. Nevertheless, the time is passing

and Verizon has not confirmed the purchase. In addition, Yahoo has already

communicated that the confirmation has not been done. This will stop the plan of

Verizon to grow the number of database subscribers.

LOW DIVERSIFICATION OF OFFERED CONTENTThe content portfolio offered by Verizon is not as diversified as it could be.

Verizon needs to acquire companies that enlarge the offer of the company. For

instance, it could be possible to make an offer for Netflix and offer films to be

watched in mobile phones. Other possibilities can be analyzed in case of not

having enough cash, but, the close competitor AT&T has already showed that

invest in content companies has to be done in order to be ready to fight coming

operators like google and facebook.

3.2RECOMMENDATIONS

Operators’ focus is to increase revenues for their holders. Traditional strategies

implemented are through promotions, discounts and mobile subsidizing in order to

increase subscribers database. Another common strategy is through merges, acquisitions

and joint ventures (to spread the cost of marketing, administrative and general costs).

Verizon has not been an exception in using those strategies. Nevertheless, this strategy

is not feasible anymore to implement. FCC has already banned some tries for merging,

like the intention of AT&T to buy T-Mobile, although most probably they would allow a

merge between T-Mobile and Sprint. Verizon has been growing until 2010 date in which it

Page 55

has stopped doing it significantly. This is normal since penetration of wireless technology

is already 81% and there is not too much room to grow in subscribers. We should remark

that we are talking about mobile wireless service and not landline (wired) service

subscribers, which Verizon is trying to switch to wireless. More than that, Verizon is trying

to finish with landline services switching the clients to wireless or selling some of the assets

to other companies.

There are strong reasons to shift wired subscriber to wireless subscribers. First, they

want to push the use of the infrastructure already installed. Additionally, they will increase

this will allow the centralization of data subscribers in order to offer new services to a broad

number of clients.

Since there is almost no room to grow in number of subscribers Verizon is trying to

increase the number of subscribers offering new content. That is the reason why they

bought AOL Time Warner in 2015. AOL Time Warner already had a sophisticated

advertisement platform through the content offered. Is the same case of Yahoo email and

Yahoo finance. They want to have the content integrated to the wireless service offered.

Additionally they are offering new services like the Internet of Things (IoT). They have

developed sophisticate gadgets that can be controlled through the mobile cell. They think

IoT will help to increase the revenue of the company as soon as it becomes massive.

Other supplementary services offered to businesses are cloud storage; IT customized

solutions and solution for federal government and cities. With all the capacity already

installed, they are flexible to provide almost any technological service to any company or

governmental entity.

Therefore, our recommendation is to increase the forward vertical integration acquiring

more content to attract more subscribers. Verizon has been already doing so. Last year

they bought AOL for approximately 4 billion dollars, but this investment is not enough when

we compare with its peer company AT&T. AT&T has made huge investment buying AT&T

and Time Warner spending around 130 billion in content. That is a lot compared with the

5 billion of Verizon. The company acquire by Verizon, AOL Time Warner has come with

different contents like the “Hufftington Post” (http://www.huffingtonpost.com/ ) digital

newspaper, Engadget (http://engadget.com/) and TechCrunch (https://techcrunch.com/) a

magazine of technical news. As specialist states (Fitchard, 2015): “Verizon has also has

put together a sophisticated suite of advertising technologies for online and traditional

media that no other company (aside from Google and Facebook) can match” and “AOL’s

platform is particularly strong in video advertising—, which ComScore says reaches more

than 50% of the U.S. population”. The Internet Company’s successful digital platform will

also coincidentally assist Verizon’s plans to launch its own Internet TV service, which it

announced this year after buying Intel’s media assets in 2014 and video delivery network

Page 56

EdgeCast in 2013 (https://techcrunch.com/2013/12/07/verizon-edgecast/)”.

In summary, Verizon is moving to become a content company but in our opinion not

with the speed required. Verizon needs to increase the investment in content for mobile

users. Content to mobile users through acquisition of content companies (AOL Time

Warner, Hufftingtonpost, TechCrunch, Go90, etc.), are okay but not enough. Verizon has

also been trying to generate some cash selling some landline business to Frontier for 14

billion. We think that is an important step in order to become a wireless and content

company.

The second recommendation is related to the content offered. Verizon must keep some

level of independence in front of political issues like current presidential election. It is clear

that for example the Huntington post have a favourable opinion toward the democrat

candidate, though, there is a risk that users with republican opinion will stop accessing

that content or have a negative opinion about this content. We recommend showing a

more variety in point of views or neutrality.

3.2.1 RECOMMENDATION 1

IMPLEMENTATION STRATEGIES.Complete the acquisition of Yahoo Finance and Yahoo email. Integrate this 500 million

database with the actual database of Verizon.

RESPONSIBILITIESCEO, CFO

PERIOD OF IMPLEMENTATIONFirst quarter 2017

RESOURCESWe recommend negotiating a 1 billion discount for the breach, meaning 3.8 billion as

final value.


IMPLEMENTATION STRATEGIES.Be more aggressive in the purchase of content companies. For instance, to buy Netflix,

in order to deliver Netflix on mobiles and laptops.

RESPONSIBILITIESCEO, CFO.

Page 57

PERIOD OF IMPLEMENTATIONFiscal year 2017.

RESOURCESInvest at least 50 USD billion in the purchase.


IMPLEMENTATION STRATEGIES.Continue selling landline operations (copper or FiOS) to operators like Frontier. This

will provide cash for new investments and to improve debt ratios. In order to avoid political

problems, create a company to absorb the unnecessary workers and sell the assets

together with the workers as a whole. In this way, they will avoid strikes from the union as

it is happening right now. Discontinue operation and maintenance of ADSL technology or

replace with new all IP technology: 4G LTE or FiOS.

RESPONSIBILITIESCEO, CFO.

PERIOD OF IMPLEMENTATIONFiscal year 2017.

RESOURCES

4. URLS

Facts mobile industryhttp://ctia.org/facts-infographics

http://ctia.org/your-wireless-life/how-wireless-works/wireless-quick-facts

Industry news and analysishttps://www.zacks.com/commentary/80596/us-telecom-industry-stock-outlook---may-

2016

http://www.marketwatch.com/industries/telecommunication

https://www.bloomberg.com/professional/blog/global-telecommunications-2016-

outlook/

https://www2.deloitte.com/us/en/pages/technology-media-and-

telecommunications/articles/telecommunications-industry-outlook.html

http://www.nasdaq.com/article/us-telecom-industry-stock-outlook-may-2016-

cm619279

http://www.telco2research.com/articles/EB_US-Market-Performance-Analysis-2016

Page 58

http://www.pcmag.com/article/345123/fastest-mobile-networks-2016/3

Citationshttps://www.zacks.com/commentary/80596/us-telecom-industry-stock-outlook---may-

2016

http://siccode.com/en/naicscodes/517210/wireless-telecommunications-carriers-

except-satellites


http://www.slideshare.net/JanDawson2/us-wireless-market-trends-q2-2015/9-

Revenue_growth_year_on_year9Source

https://witchersummerengl4000.files.wordpress.com/2016/04/51721-wireless-

telecommunications-carriers-in-the-us-industry-report.pdf

http://www.slideshare.net/noorec786/generations-of-network-1-g-2g-3g-4g-5g

AOLhttp://fortune.com/2015/06/24/verizon-gains-aol/

Mobile Contenthttp://www.huffingtonpost.com/

http://www.huffingtonpost.com/entry/donald-trump-racist-

examples_us_56d47177e4b03260bf777e83

https://techcrunch.com/

https://www.engadget.com/

http://www.mediapost.com/publications/article/257917/?utm_source=feedburner&utm

_medium=feed&utm_campaign=Feed%3A+social-media-marketing-

daily+%28MediaPost+%7C+Social+Media+Marketing+Daily%29

https://www.beyond.com/news/verizon-starts-go90-mobile-first-video-and-social-

platform-123238784

Verizon to buy yahoohttps://techcrunch.com/2016/10/20/verizon-earnings/

https://www.youtube.com/watch?v=NEEug_1XEcc

https://www.zacks.com/commentary/80596/us-telecom-industry-stock-outlook---may-

2016

FiOS Content

Page 59

https://www.verizonwireless.com/home-services/twc/

http://arstechnica.com/business/2015/01/verizon-nears-the-end-of-fios-builds/

http://arstechnica.com/business/2016/04/verizons-fiber-is-the-only-fix-program-

upgrades-old-copper-lines/

http://www.verizon.com/home/fios/

Internet of Thingshttps://www.hum.com/

https://www.youtube.com/watch?v=BxxvgnCAOLU

https://www.youtube.com/watch?v=QaTIt1C5R-M

The pasthttp://www.digitaltrends.com/mobile/best-family-plan-us-carriers/2/

The futurehttps://www.zacks.com/commentary/80596/us-telecom-industry-stock-outlook---may-

2016

Largest Telecom companies in the worldhttp://www.investopedia.com/articles/markets/030216/worlds-top-10-

telecommunications-companies.asp

T-Mobile strategyhttp://www.digitaltrends.com/mobile/t-mobile-disruptive-mike-sievert/

file:///C:/Users/Carlos/Downloads/NEWImpactReport.pdf

AT&T strategyhttp://www.123helpme.com/att-business-strategy-view.asp?id=158342

Sprint strategyhttp://marketrealist.com/2016/05/sprints-customer-growth-strategy-us-wireless-space/

5. APPENDIX

VZ - BALANCE SHEET

2,015 2,014 2,013 2,012

Page 60

12/31/2015 12/31/2014 12/31/2013 12/31/2012

Cash 4,470 10,598 53,528 3,093

Short Term Investments 350 555 601 470

ASSETS

Cash & Short Term Investments 4,820 11,153 54,129 3,563

Receivables - Net 13,457 13,993 12,439 12,576

Inventories - Total 1,252 1,153 1,020 1,075

Prepaid Expenses -- -- -- --

Other Current Assets 2,751 3,200 3,406 4,021

CURRENT ASSETS - TOTAL 22,280 29,499 70,994 21,235

Land 709 763 819 859

Buildings 25,587 25,209 23,857 22,909

Machinery & Equipment 173,491 184,416 176,834 167,023

Other Property, Plant & Equipment 15,469 15,540 15,179 14,658

Property, Plant, & Equipment under Capitalized Leases -- -- -- 358

Property, Plant and Equipment - Gross 220,163 230,508 220,865 209,575

Accumulated Depreciation -136,622 -140,561 -131,909 -120,933

Property, Plant and Equipment - Net 83,541 89,947 88,956 88,642

Investments in Associated Companies 796 802 3,432 3,401

Other Tangible Assets 17,779 6,660 4,535 4,128

Total Intangible Other Assets - Net 120,244 105,708 106,181 107,816

Other Assets - Total 138,023 112,368 110,716 111,944

TOTAL ASSETS 244,640 232,616 274,098 225,222

LIABILITIES

Accounts Payable 6,391 5,598 4,954 4,454

Short Term Debt & Current Portion of Long Term Debt 6,489 2,735 3,933 4,369

Accrued Payroll 4,107 4,131 4,790 5,006

Income Taxes Payable 2,054 1,457 1,556 1,561

Dividends Payable 2,323 2,307 1,539 1,494

Other Current Liabilities 13,688 11,759 10,278 11,566

CURRENT LIABILITIES - TOTAL 35,052 27,987 27,050 26,956

Capitalized Lease Obligations -- -- -- 234

Long Term Debt 103,705 110,536 89,658 47,618

Provision for Risks and Charges 29,957 33,280 27,682 34,346

Deferred Taxes - Credit 45,484 41,563 28,639 24,677

DEFERRED TAXES 45,484 41,563 28,639 24,677

Other Liabilities 12,600 5,574 5,653 6,092

TOTAL LIABILITIES 226,798 218,940 178,682 139,689

EQUITY

Non-Equity Reserves 0 0 0 0

Minority Interest 1,414 1,378 56,580 52,376

Preferred Stock 0 0 0 0

Common Stock 424 424 297 297

Capital Surplus 11,196 11,155 37,939 37,990

Other Appropriated Reserves 1,281 1,429 1,275 1,253

Page 61

Retained Earnings 11,246 2,447 1,782 -3,734

ESOP Guarantees -428 -424 -421 -440

Unrealized Foreign Exchange Gain/Loss -554 -346 853 793

Unrealized Gain/Loss on Marketable Securities -177 28 230 189

Treasury Stock -7,416 -3,263 -3,961 -4,071

COMMON EQUITY 16,428 12,298 38,836 33,157

TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY 244,640 232,616 274,098 225,222

SHARE INFORMATION

Common Shares Outstanding 4,073 4,155 2,862 2,859Table 22-Verizon Balance Sheet

VZ – INCOME STATEMENT

2,015 2,014 2,013 2,012

12/31/2015 12/31/2014 12/31/2013 12/31/2012

NET SALES OR REVENUES 131,620 127,079 120,550 115,846

Cost of Goods Sold (Excl Depreciation) 52,557 49,931 44,887 46,235

Depreciation, Depletion And Amortization 16,017 16,533 16,606 16,460

Depreciation 14,323 14,966 15,019 14,920

Amortization of Intangibles 1,694 1,567 1,587 1,540

GROSS INCOME 63,046 60,615 59,057 53,151

Selling, General & Admin Expenses 32,496 33,909 33,599 32,145

OPERATING INCOME 30,550 26,706 25,458 21,006

Extraordinary Credit - Pretax 2,510 707 6,510 0

Extraordinary Charge - Pretax 0 -7,814 0 -7,846

Non-Operating Interest Income 115 108 64 57

Other Income/Expenses - Net 71 -1,302 -230 -1,073

Interest Expense On Debt 5,504 5,291 3,421 2,977

Interest Capitalized 584 376 754 406

PRETAX INCOME 28,326 13,490 29,135 9,573

Income Taxes -9,865 -3,314 -5,730 660

Current Domestic Income Tax 6,279 3,325 4 337

Current Foreign Income Tax 70 81 -59 -45

Deferred Domestic Income Tax 3,507 -83 5,777 -956

Deferred Foreign Income Tax 9 -9 8 10

Income Tax Credits -- -- -- 6

Minority Interest 496 2,331 12,050 9,682

Equity in Earnings -86 1,780 142 324NET INCOME BEFORE EXTRA ITEMS/PREFERREDDIVIDENDS 17,879 9,625 11,497 875NET INCOME USED TO CALCULATE BASICEARNINGS PER SHARE 17,879 9,625 11,497 875

Shares used in computing earnings per share - FullyDiluted 4,093 3,981 2,874 2,862

Earning per Common Share - Basic 4.38 2.42 4.01 0.31

Earning per Common Share - Fully Diluted 4.37 2.42 4 0.31Table 23-Verizon Income Statement

Page 62

VZ – STATEMENT OF CASH FLOW

2,015 2,014 2,013 2,012

12/31/2015 12/31/2014 12/31/2013 12/31/2012

OPERATING ACTIVITIES

Net Income / Starting Line 18,375 11,956 23,547 875

Depreciation and Depletion 14,323 14,966 15,019 14,920

Amoritization of Intangible Assets 1,694 1,567 1,587 1,540

Depreciation, Depletion and Amortization 16,017 16,533 16,606 16,460

Deferred Income Taxes 3,516 -92 5,785 -952

Deferred Income Taxes & Investment Tax Credit 3,516 -92 5,785 -952

Total Other Cash Flow -1,421 4,394 -7,115 15,506

Funds From Operations 36,487 32,791 38,823 17,335

Extraordinary Items 0 0 0 0

Decrease/Increase In Receivables -945 -2,745 -843 -1,717

Decrease/Increase In Inventories -99 -132 56 -136

Increase/Decrease In Accounts Payable 2,545 1,412 925 1,144

Decrease/Increase In Other Assets/Liability 942 -695 -143 306

Funds From/For Other Operating Activities 2,443 -2,160 -5 -403

NET CASH FLOW - OPERATING ACTIVITIES 38,930 30,631 38,818 31,486

INVESTING

Decrease In Investments 0 0 63 27

Capital Expenditures (Additions To Fixed Assets) -17,775 -17,191 -16,604 -16,175

Disposal Of Fixed Assets 48 120 0 --

Net Assets From Acquisitions -3,545 -182 0 0

Other Uses - Investing 0 -616 0 --

Other Sources - Investing 1,171 2,367 2,782 494

Other Sources(Uses) - Investing 1,171 1,751 2,782 494

Additions To Other Assets -9,942 -354 -1,074 -4,848

NET CASH FLOW - INVESTING -30,043 -15,856 -14,833 -20,502

FINANCING

Increase/Decrease In Short Term Borrowings -344 -475 -142 -1,437

Long Term Borrowings 6,667 30,967 49,166 4,489

Reduction In Long Term Debt -9,340 -17,669 -8,163 -6,403

Other Proceeds From Sale/Issuance of Stock 40 34 85 315

Net Proceeds from Sale/Issue of Common & Preferred 40 34 85 315

Common/Preferred Redeemed, Retired, Converted, Etc. -5,134 0 -153 0

Common Dividends (Cash) -8,538 -7,803 -5,936 -5,230

Cash Dividends Paid - Total -8,538 -7,803 -5,936 -5,230

Other Sources - Financing 1,634 0 0 --

Other Uses - Financing 0 -62,759 -8,407 -12,987

Other Sources(Uses) - Financing 1,634 -62,759 -8,407 -12,987

NET CASH FLOW - FINANCING -15,015 -57,705 26,450 -21,253INCREASE/DECREASE IN CASH AND SHORT TERMINVESTMENTS -6,128 -42,930 50,435 -10,269

Taxes Paid 5,293 4,093 422 351

Page 63

Interest Paid 4,491 4,429 2,122 1,971Table 24-Verizon Statement of Cash Flow

AT&T – BALANCE SHEET

2,015 2,014 2,013 2,012

12/31/2015 12/31/2014 12/31/2013 12/31/2012

Cash 5,121 8,603 3,339 4,868

Short Term Investments -- -- -- 4,759

ASSETS

Cash & Short Term Investments 5,121 8,603 3,339 4,868

Receivables - Net 16,532 14,527 12,918 12,657

Inventories - Total 4,033 1,933 0 0

Prepaid Expenses 1,072 831 960 1,035



Land 1,638 1,567 1,523 1,689

Buildings 33,784 32,204 31,485 28,939

Machinery & Equipment 253,487 236,867 230,364 80,338

Other Property, Plant & Equipment 306,227 -- -- 147,572




Investments in Associated Companies 1,606 250 3,860 4,581

Other Tangible Assets 15,346 13,425 8,278 6,713



TOTAL ASSETS 402,672 296,834 277,787 272,315

LIABILITIES


Short Term Debt & Current Portion of Long Term Debt 7,636 6,056 5,498 3,486

Accrued Payroll 2,629 1,967 1,985 4,448

Income Taxes Payable -- -- -- 1,026

Dividends Payable 2,950 2,438 2,404 2,556



Capitalized Lease Obligations 884 430 0 0

Long Term Debt 118,515 75,778 69,290 66,358

Provision for Risks and Charges 34,262 37,079 29,946 41,392


DEFERRED TAXES 56,181 38,436 36,308 28,491



EQUITY


Minority Interest 969 554 494 333

Page 64


Common Stock 6,495 6,495 6,495 6,495

Capital Surplus 89,763 91,108 91,091 91,038

Other Appropriated Reserves 6,032 6,847 7,352 5,236

Retained Earnings 33,671 31,081 31,141 22,481

Unrealized Foreign Exchange Gain/Loss -1,182 715 78 0

Unrealized Gain/Loss on Marketable Securities 484 499 450 0

Treasury Stock -12,592 -47,029 -45,619 -32,888

COMMON EQUITY 122,671 89,716 90,988 92,362


SHARE INFORMATION

Common Shares Outstanding 6,145 5,187 5,226 5,581Table 25-AT&T Balance Sheet

AT&T – INCOME STATEMENT

2,015 2,014 2,013 2,012

12/31/2015 12/31/2014 12/31/2013 12/31/2012




Depreciation 19,289 17,773 17,722 16,933

Amortization of Intangibles 2,728 500 672 1,210

Amortization of Deferred Charges 0 0 1 --

GROSS INCOME 60,451 54,516 58,893 54,063


Research and Development Expense 1,693 1,730 1,488 1,278

OPERATING INCOME 27,497 14,819 30,479 12,997

Extraordinary Credit - Pretax 16 29 113 179

Extraordinary Charge - Pretax -2,813 -2,636 -113 -179

Non-Operating Interest Income -- -- -- 61

Other Income/Expenses - Net 33 1,581 596 134

Interest Expense On Debt 4,917 3,847 4,224 3,707


PRETAX INCOME 20,613 10,180 27,135 9,687

Income Taxes -7,005 -3,619 -9,224 -2,900

Current Domestic Income Tax 2,568 1,508 2,982 1,153

Current Foreign Income Tax 320 163 -- --

Deferred Domestic Income Tax 4,499 1,987 6,242 1,747

Deferred Foreign Income Tax -382 -39 -- --


Equity in Earnings 79 175 642 752NET INCOME BEFORE EXTRA ITEMS/PREFERREDDIVIDENDS 13,345 6,442 18,249 7,264NET INCOME USED TO CALCULATE BASICEARNINGS PER SHARE 13,345 6,442 18,249 7,264

Shares used in computing earnings per share - FullyDiluted 5,646 5,221 5,385 5,821

Page 65

Earning per Common Share - Basic 2.37 1.24 3.4 1.25

Earning per Common Share - Fully Diluted 2.37 1.24 3.39 1.25Table 26-AT&T Income Statement

AT&T – CASH FLOW

2,015 2,014 2,013 2,012

12/31/2015 12/31/2014 12/31/2013 12/31/2012


Net Income / Starting Line 13,687 6,736 18,553 7,539


Amoritization of Intangible Assets -- 500 673 1,210


Deferred Income Taxes 4,117 1,948 6,242 1,285

Deferred Income Taxes & Investment Tax Credit 4,117 1,948 6,242 1,285

Total Other Cash Flow -694 9,533 -7,446 10,759



Decrease/Increase In Receivables -535 -2,651 -1,329 -1,365

Increase/Decrease In Accounts Payable 1,291 2,412 -152 1,798

Decrease/Increase In Other Assets/Liability -4,002 -4,913 533 1,017

Funds From/For Other Operating Activities -3,246 -5,152 -948 1,450


INVESTING

Increase In Investments 0 -1,890 0 0

Decrease In Investments 1,545 0 0 65


Disposal Of Fixed Assets 83 8,123 1,923 812

Net Assets From Acquisitions -30,759 -3,141 -4,113 -828

Other Uses - Investing -797 -234 -291 -1

Other Sources - Investing 2 4 301 0

Other Sources(Uses) - Investing -795 -230 10 -1


FINANCING

Increase/Decrease In Short Term Borrowings -1 -16 20 1

Long Term Borrowings 33,969 16,033 16,836 13,486

Reduction In Long Term Debt -10,042 -10,400 -7,698 -8,733

Other Proceeds From Sale/Issuance of Stock 143 39 114 477

Net Proceeds from Sale/Issue of Common & Preferred 143 39 114 477

Common/Preferred Redeemed, Retired, Converted, Etc. -269 -1,617 -13,028 -12,752

Common Dividends (Cash) -10,200 -9,552 -9,696 -10,241

Cash Dividends Paid - Total -10,200 -9,552 -9,696 -10,241

Other Sources - Financing 0 0 251 89

Other Uses - Financing -3,818 -2,224 0 0

Other Sources(Uses) - Financing -3,818 -2,224 251 89

NET CASH FLOW - FINANCING 9,782 -7,737 -13,201 -17,673

Page 66

INCREASE/DECREASE IN CASH AND SHORT TERM INVESTMENTS -3,482 5,264 -1,529 1,823

Taxes Paid 1,851 1,532 1,985 458

Interest Paid 4,822 4,099 4,302 3,696

Unrealized Gains/Losses from Fair Value Adjustment of Financial Assets 91 -1,461 -492 0Table 27-AT&T Cash Flow

T-MOBILE BALANCE SHEET

2,015 2,014 2,013 2,012

12/31/2015 12/31/2014 12/31/2013 12/31/2012

Cash 4,582 5,315 5,891 394

Short Term Investments 2,998 -- -- 106

ASSETS

Cash & Short Term Investments 7,580 5,315 5,891 500

Receivables - Net 4,202 5,003 3,660 3,360

Inventories - Total 1,295 1,085 586 457

Prepaid Expenses -- -- -- 65



Buildings 1,900 1,948 1,862 1,819

Machinery & Equipment -- -- -- 6,258

Transportation Equipment -- -- -- 488K

Other Property, Plant & Equipment 30,302 26,621 25,565 21,995




Long Term Receivables 847 1,628 0 0

Other Investments 0 0 0 144

Other Tangible Assets 444 288 1,367 501



TOTAL ASSETS 62,413 56,653 49,953 33,622

LIABILITIES


Short Term Debt & Current Portion of Long Term Debt 182 87 244 0

Accrued Payroll 521 470 394 351

Income Taxes Payable -- -- -- 459K



Capitalized Lease Obligations 664 -- 353 310

Long Term Debt 28,719 24,394 22,441 16,116


DEFERRED TAXES 4,061 4,873 4,645 3,618



EQUITY

Page 67




Common Stock 0 0 0 0

Capital Surplus 38,666 38,503 37,330 29,197

Other Appropriated Reserves -1 1 3 41

Retained Earnings -22,108 -22,841 -23,088 -23,123

Treasury Stock -- -- -- -11

COMMON EQUITY 16,557 15,663 14,245 6,115


SHARE INFORMATION

Common Shares Outstanding 818 807 802 268Table 28-T-Mobile Balance Sheet

T-MOBILE – INCOME STATEMENT

2,015 2,014 2,013 2,012

12/31/2015 12/31/2014 12/31/2013 12/31/2012




Depreciation 4,412 -- -- --

Amortization of Intangibles 276 -- -- --

GROSS INCOME 12,467 9,743 8,538 8,434


Other Operating Expenses -230 5 54 0

OPERATING INCOME 1,902 576 994 1,631

Extraordinary Charge - Pretax -- -- -54 -8,219

Non-Operating Interest Income 420 359 189 77

Other Income/Expenses - Net -78 829 91 186

Interest Expense On Debt 1,496 1,432 1,228 670


PRETAX INCOME 978 413 51 -6,986

Income Taxes -245 -166 -16 -350

Current Domestic Income Tax -28 6 -4 32

Current Foreign Income Tax 17 38 10 10

Deferred Domestic Income Tax 244 119 2 307

Deferred Foreign Income Tax 12 3 8 1NET INCOME BEFORE EXTRA ITEMS/PREFERREDDIVIDENDS 733 247 35 -7,336

Preferred Dividend Requirements 55 0 0 0NET INCOME USED TO CALCULATE BASICEARNINGS PER SHARE 678 247 35 -7,336

Shares used in computing earnings per share - FullyDiluted 823 816 677 268

Earning per Common Share - Basic 0.83 0.31 0.05 -27.41

Earning per Common Share - Fully Diluted 0.82 0.3 0.05 -27.41Table 29-T-Mobile Income Statement

Page 68

T-MOBILE – CASH FLOW

2,015 2,014 2,013 2,012

12/31/2015 12/31/2014 12/31/2013 12/31/2012


Net Income / Starting Line 733 247 35 -7,336


Amoritization of Intangible Assets 276 -- -- --


Deferred Income Taxes 256 122 10 308

Deferred Income Taxes & Investment Tax Credit 256 122 10 308

Total Other Cash Flow 904 4 939 8,703



Decrease/Increase In Receivables 830 -2,519 -1,315 -700

Decrease/Increase In Inventories -2,495 -499 42 -2

Increase/Decrease In Accounts Payable 693 2,395 611 -32

Decrease/Increase In Other Assets/Liability -195 -16 -404 -266

Funds From/For Other Operating Activities -1,167 -639 -1,066 -1,000


INVESTING

Increase In Investments -2,997 -49 -33 -27


Disposal Of Fixed Assets 0 20 3 51

Net Assets From Acquisitions 0 0 2,144 0

Other Uses - Investing 0 0 -100 -651

Other Sources - Investing 96 0 300 0

Other Sources(Uses) - Investing 96 0 200 -651

Additions To Other Assets -1,935 -2,900 -381 -387


FINANCING

Increase/Decrease In Short Term Borrowings -564 -418 -244 10

Long Term Borrowings 4,119 2,993 2,494 0

Reduction In Long Term Debt -57 -1,019 -89 -9

Proceeds From Stock Options 47 27 137 0

Other Proceeds From Sale/Issuance of Stock 0 982 1,787 0

Net Proceeds from Sale/Issue of Common & Preferred 47 1,009 1,924 0

Preferred Dividends (Cash) -55 0 0 0

Cash Dividends Paid - Total -55 0 0 0

Other Sources - Financing 79 34 0 2,469

Other Uses - Financing -156 -75 -41 -2,403

Other Sources(Uses) - Financing -77 -41 -41 66

NET CASH FLOW - FINANCING 3,413 2,524 4,044 57

INCREASE/DECREASE IN CASH AND SHORT TERMINVESTMENTS -733 -576 5,497 4

Taxes Paid 54 36 20 42

Page 69

Interest Paid 1,298 1,367 1,156 845

Unrealized Gains/Losses from Fair Value Adjustment ofFinancial Assets 148 -- -- -7

Table 30-T-Mobile Cash Flow

SPRINT – BALANCE SHEET

2,015 2,014 2,013

12/31/2015 12/31/2014 12/31/2013

Cash 4,010 4,970 6,364

Short Term Investments 166 1,220 1,105

ASSETS

Cash & Short Term Investments 4,176 6,190 7,469

Receivables - Net 3,488 3,828 3,570

Inventories - Total 1,359 982 1,205

Prepaid Expenses 401 451 --

Other Current Assets 353 128 814

CURRENT ASSETS - TOTAL 9,777 11,579 13,058

Land 266 265 --

Buildings 754 745 --

Other Property, Plant & Equipment -- 14,902 --

Property, Plant and Equipment - Gross 25,079 18,748 --

Accumulated Depreciation -5,358 -2,449 --

Property, Plant and Equipment - Net 19,721 16,299 16,164

Long Term Receivables 361 -- 0

Investments in Associated Companies 0 146 94

Other Investments 151 0 49

Deferred Charges 0 -- 0

Other Tangible Assets 376 746 458

Total Intangible Other Assets - Net 52,455 55,919 56,272

Other Assets - Total 52,831 56,665 56,730

TOTAL ASSETS 82,841 84,689 86,095

LIABILITIES

Accounts Payable 3,786 2,492 3,312

Short Term Debt & Current Portion of Long Term Debt 1,300 991 994

Accrued Payroll 589 290 --

Income Taxes Payable -- 306 --

Other Current Liabilities 5,265 4,333 6,363

CURRENT LIABILITIES - TOTAL 10,940 8,412 10,669

Capitalized Lease Obligations 127 174 --

Long Term Debt 32,342 31,787 32,017

Provision for Risks and Charges 1,571 0 --

Deferred Income 595 1,286 0

Deferred Taxes - Credit 13,898 14,207 14,227

DEFERRED TAXES 13,898 14,207 14,227

Other Liabilities 1,785 3,685 3,598

TOTAL LIABILITIES 61,131 59,377 60,511

Page 70

EQUITY

Non-Equity Reserves 0 0 0

Minority Interest 0 0 0

Preferred Stock 0 0 0

Common Stock 40 39 39

Capital Surplus 27,468 27,354 27,330

Other Appropriated Reserves -388 -43 102

Retained Earnings -5,383 -2,038 -1,887

Unrealized Foreign Exchange Gain/Loss -21 0 0

Unrealized Gain/Loss on Marketable Securities 1 0 0

Treasury Stock -7 0 --

COMMON EQUITY 21,710 25,312 25,584

TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY 82,841 84,689 86,095

SHARE INFORMATION

Common Shares Outstanding 3,967 3,941 3,934Table 31-Sprint Balance Sheet

SPRINT – INCOME STATEMENT

2,015 2,014 2,013

12/31/2015 12/31/2014 12/31/2013

NET SALES OR REVENUES 34,532 35,500 16,891

Cost of Goods Sold (Excl Depreciation) 18,969 18,640 9,777

Depreciation, Depletion And Amortization 5,349 5,188 2,934

Depreciation 3,797 3,472 2,026

Amortization of Intangibles 1,552 1,716 908

GROSS INCOME 10,214 11,672 4,180

Selling, General & Admin Expenses 9,563 9,484 4,841

Other Operating Expenses 59 0 0

OPERATING INCOME 592 2,188 -661

Extraordinary Credit - Pretax 41 0 0

Extraordinary Charge - Pretax -2,528 -127 -309

Non-Operating Interest Income 12 -- --

Other Income/Expenses - Net 15 4 73

Interest Expense On Debt 2,051 2,064 918

PRETAX INCOME -3,919 1 -1,815

Income Taxes 574 -224 -45

Current Domestic Income Tax 34 224 45

Current Foreign Income Tax 1 0 --

Deferred Domestic Income Tax -609 0 --

NET INCOME BEFORE EXTRA ITEMS/PREFERRED DIVIDENDS -3,345 -223 -1,860NET INCOME USED TO CALCULATE BASIC EARNINGS PERSHARE -3,345 -223 -1,860

Shares used in computing earnings per share - Fully Diluted 3,953 3,949 3,475

Earning per Common Share - Basic -0.85 -0.06 -0.54

Earning per Common Share - Fully Diluted -0.85 -0.06 -0.54Table 32-Sprint Income Statement

Page 71

SPRINT – CASH FLOW STATEMENT

2,015 2,014 2,013

12/31/2015 12/31/2014 12/31/2013


Net Income / Starting Line -3,345 -151 -1,860

Depreciation and Depletion 3,797 868 2,026

Amoritization of Intangible Assets 1,552 429 908

Depreciation, Depletion and Amortization 5,349 1,297 2,934

Deferred Income Taxes -609 46 32

Deferred Income Taxes & Investment Tax Credit -609 46 32

Total Other Cash Flow 2,990 179 136

Funds From Operations 4,385 1,371 1,242

Extraordinary Items 0 0 0

Decrease/Increase In Receivables -644 -232 -558

Decrease/Increase In Inventories -1,573 173 -391

Increase/Decrease In Accounts Payable 481 -490 25

Decrease/Increase In Other Assets/Liability -199 -300 -379

Funds From/For Other Operating Activities -1,935 -849 -1,303

NET CASH FLOW - OPERATING ACTIVITIES 2,450 522 -61

INVESTING

Increase In Investments -2,077 -1,035 -1,719

Decrease In Investments 3,131 920 1,715

Capital Expenditures (Additions To Fixed Assets) -6,167 -1,488 -3,993

Disposal Of Fixed Assets 410 0 0

Net Assets From Acquisitions 0 -- -14,112

Other Uses - Investing -11 -1 0

Other Sources - Investing 0 0 1

Other Sources(Uses) - Investing -11 -1 1

Additions To Other Assets -- -152 --

NET CASH FLOW - INVESTING -4,714 -1,756 -18,108

FINANCING

Long Term Borrowings 1,930 0 9,500

Reduction In Long Term Debt -574 -160 -3,378

Other Proceeds From Sale/Issuance of Stock 35 0 18,567

Net Proceeds from Sale/Issue of Common & Preferred 35 0 18,567

Other Sources - Financing 0 0 0

Other Uses - Financing -87 0 -161

Other Sources(Uses) - Financing -87 0 -161

NET CASH FLOW - FINANCING 1,304 -160 24,528

INCREASE/DECREASE IN CASH AND SHORT TERMINVESTMENTS -960 -1,394 6,359

Table 33-Sprint Cash Flow Statement

Page 72

VERIZON FINANCIAL RATIOS

2015 2014 2013 201212/31/2015 12/31/2014 12/31/2013 12/31/2012

LIQUIDITYCurrent ratio 0.64 1.05 2.62 0.79Cash ratio 0.13 0.38 1.98 0.11Quick ratio 0.60 1.01 2.59 0.75

PROFITABILITYGross profit margin 0.48 0.48 0.49 0.46Operating profit margin 0.23 0.21 0.21 0.18Net profit margin 0.14 0.08 0.10 0.01

VALUATION RATIOSEPS 4.38 2.42 4.01 0.31

LEVERAGE RATIOSDebt/Equity (TD) 12.71 16.01 1.87 1.63Debt/Equity (LTD) 5.81 8.08 0.94 0.56Debt ratio 0.93 0.94 0.65 0.62

ACTIVITY RATIOSA/R Turnover 9.78 9.08 9.69 9.21A/P Turnover 20.59 22.70 24.33 26.01Inventory turnover 41.98 43.31 44.01 43.01Avg. Collection Period 36.81 39.64 37.15 39.08

INTEREST COVERAGE RATIOEBITDA Coverage ratio 7.65 7.63 10.08 11.07TIA(Time Interest Earned) 5.02 4.71 6.10 6.21

OPERATING RETURNSROE 1.00 0.70 0.12 0.01ROA 0.073 0.041 0.042 0.004Asset turnover ratio 0.54 0.55 0.44 0.51Inventory turnover ratio 41.98 43.31 44.01 43.01

Tax rate = 34.93%

RETURN ON INVESTMENTEBIT 30,550 26,706 25,458 21,006Book Value of Equity 17,842 13,676 95,416 85,533Net debt 221,978 207,787 124,553 136,126ROIC 8.29% 7.85% 7.53% 6.17%

Page 73

Table 34-Verizon Financial Ratios

Figure 44-Verizon Liquidity Ratios

Figure 45-Verizon Profitability Ratios

0.00

0.50

1.00

1.50

2.00

2.50

3.00

12/31/201512/31/201412/31/201312/31/2012

2015201420132012

VERIZON - LIQUIDITY RATIOS

Current ratio Cash ratio Quick ratio

0.00

0.10

0.20

0.30

0.40

0.50

0.60

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VERIZON - PROFITABILITY RATIOS

Gross profit margin Operating profit margin

Net profit margin Linear (Net profit margin)

Page 74

Figure 46-Verizon Activity Ratios

Figure 47-Verizon Interest Coverage Ratios

0.005.0010.0015.0020.0025.0030.0035.0040.0045.0050.00

12/31/201512/31/201412/31/201312/31/2012

2015201420132012

VERIZON - ACTIVITY RATIOS

A/R Turnover A/P Turnover Inventory turnover Avg. Collection Period

0.00

2.00

4.00

6.00

8.00

10.00

12.00

12/31/201512/31/201412/31/201312/31/2012

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VERIZON - INTEREST COVERAGE RATIOS

EBITDA Coverage ratio TIA(Time Interest Earned)

Page 75

Figure 48-Verizon Operating Return Ratios

Figure 49-Verizon Leverage Ratios

AT&T FINANCIAL RATIOS

2015 2014 2013 201212/31/2015 12/31/2014 12/31/2013 12/31/2012


0.00

0.20

0.40

0.60

0.80

1.00

1.20

12/31/201512/31/201412/31/201312/31/2012

2015201420132012

VERIZON - OPERATING RETURNS RATIOS

ROE ROA Asset turnover ratio ROIC

0.002.004.006.008.0010.0012.0014.0016.0018.00

12/31/201512/31/201412/31/201312/31/2012

2015201420132012

VERIZON - LEVERAGE RATIOS

Debt/Equity (TD) Debt/Equity (LTD) Debt ratio

Page 76

PROFITABILITYGross profit margin 0.41 0.41 0.46 0.42Operating profit margin 0.19 0.11 0.24 0.10Net profit margin 0.09 0.05 0.14 0.06

VALUATION RATIOSEPS 2.37 1.24 3.40 1.25

LEVERAGE RATIOSDebt/Equity (TD) 2.26 2.29 2.04 1.94Debt/Equity (LTD) 1.87 1.88 1.65 1.59Debt Ratio 0.69 0.70 0.67 0.66

ACTIVITY RATIOSA/R Turnover 8.88 9.12 9.97 10.07A/P Turnover 6.97 8.84 11.14 6.22Inventory turnover 36.40 68.52 #DIV/0! #DIV/0!Avg. Collection Period 40.54 39.49 36.12 35.76

INTEREST COVERAGE RATIOEBITDA Coverage ratio 8.67 8.11 10.84 7.84TIA(Time Interest Earned) 4.81 3.63 6.76 3.27

OPERATING RETURNSROE 0.11 0.07 0.20 0.08ROA 0.033 0.022 0.066 0.027Asset turnover ratio 0.36 0.45 0.46 0.47Inventory turnover ratio 15.95 30.86 #DIV/0! #DIV/0!

Tax rate = 34.93%

RETURN ON INVESTMENTEBIT 27,497 14,819 30,479 12,997Book Value of Equity 123,640 90,270 91,482 92,695Net debt 273,911 197,961 182,966 174,752ROIC 4.50% 3.35% 7.23% 3.16%

Table 35-AT&T Financial Ratios

Page 77

Figure 50-AT&T Liquidity Ratios

Figure 51-AT&T Profitability Ratios

0.000.100.200.300.400.500.600.700.800.901.00

12/31/201512/31/201412/31/201312/31/2012

2015201420132012

AT&T - LIQUIDITY RATIOS


0.00

0.10

0.20

0.30

0.40

0.50

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AT&T- PROFITABILITY RATIOS



Page 78

Figure 52-AT&T Activity Ratios

Figure 53-AT&T Interest Coverage Ratios

0.0010.0020.0030.0040.0050.0060.0070.0080.00

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AT&T- ACTIVITY RATIOS


0.00

2.00

4.00

6.00

8.00

10.00

12.00

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AT&T- INTEREST COVERAGE RATIOS


Page 79

Figure 54-AT&T Operating Return Ratios

Figure 55-AT&T Leverage Ratios

T-MOBILE FINANCIAL RATIOS

2015 2014 2013 201212/31/2015 12/31/2014 12/31/2013 12/31/2012


PROFITABILITY

0.000.050.100.150.200.250.300.350.400.450.50

12/31/201512/31/201412/31/201312/31/2012

2015201420132012

AT&T - OPERATING RETURNS RATIOS


0.00

0.50

1.00

1.50

2.00

2.50

12/31/201512/31/201412/31/201312/31/2012

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AT&T LEVERAGE RATIOS

Debt/Equity (TD) Debt/Equity (LTD) Debt Ratio

Page 80

Gross profit margin 0.39 0.33 0.35 0.43Operating profit margin 0.06 0.02 0.04 0.08Net profit margin 0.02 0.01 0.00 -0.37

VALUATION RATIOSEPS 0.83 0.31 0.05 -27.41

LEVERAGE RATIOSDebt/Equity (TD) 2.77 2.62 2.51 4.50Debt/Equity (LTD) 2.19 2.06 2.10 3.58Debt Ratio 0.73 0.72 0.71 0.82

ACTIVITY RATIOSA/R Turnover 7.63 5.91 6.67 5.87A/P Turnover 3.96 5.56 8.07 9.12Inventory turnover 24.75 27.25 41.67 43.15Avg. Collection Period 47.19 60.92 53.96 61.34

INTEREST COVERAGE RATIO (LESS THAN 5 LOW QUALITY BORROWS)EBITDA Coverage ratio 3.68 3.30 3.79 7.10TIA(Time Interest Earned) 0.97 0.38 0.85 2.40

OPERATING RETURNSROE 0.04 0.02 0.00 -1.20ROA 0.011 0.004 0.001 -0.218Asset turnover ratio 0.51 0.52 0.49 0.59Inventory turnover ratio 11.50 14.20 20.91 17.72

Tax rate = 34.93%

RETURN ON INVESTMENTEBIT 1,672 581 1,048 1,631Book Value of Equity 16,557 15,663 14,245 6,115Net debt 41,274 35,675 29,817 27,113ROIC 1.01% 0.40% 0.83% 1.71%

Table 36-T-Mobile Financial Ratios

Page 81

Figure 56-T-Mobile Liquidity Ratios

Figure 57-T-Mobile Profitability Ratios

0.00

0.50

1.00

1.50

2.00

2.50

12/31/201512/31/201412/31/201312/31/2012

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T-MOBILE - LIQUIDITY RATIOS


-0.50-0.40-0.30-0.20-0.100.000.100.200.300.400.50

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T-MOBILE- PROFITABILITY RATIOS



Page 82

Figure 58-T-Mobile Activity Ratios

Figure 59-T-Mobile Interest Coverage Ratio

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

12/31/201512/31/201412/31/201312/31/2012

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T-MOBILE- ACTIVITY RATIOS


0.001.002.003.004.005.006.007.008.00

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T-MOBILE- INTEREST COVERAGE RATIOS


Page 83

Figure 60-T-Mobile Operating Return Ratios

Figure 61-T-Mobile Leverage Ratios

SPRINT FINANCIAL RATIOS

2015 2014 201312/31/2015 12/31/2014 12/31/2013

LIQUIDITYCurrent ratio 0.89 1.38 1.22Cash ratio 0.37 0.59 0.60Quick ratio 0.77 1.26 1.11

PROFITABILITYGross profit margin 0.30 0.33 0.25

-1.40-1.20-1.00-0.80-0.60-0.40-0.200.000.200.400.600.80

12/31/201512/31/201412/31/201312/31/2012

2015201420132012

T-MOBILE - OPERATING RETURN RATIOS


0.000.501.001.502.002.503.003.504.004.505.00

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T-MOBILE LEVERAGE RATIOS


Page 84

Operating profit margin 0.02 0.06 -0.04Net profit margin -0.10 -0.01 -0.11

VALUATION RATIOSEPS -0.85 -0.06 -0.54

LEVERAGE RATIOSDebt/Equity (TD) 2.82 2.35 2.37Debt/Equity (LTD) 2.31 2.01 1.95Debt Ratio 0.74 0.70 0.70

ACTIVITY RATIOSA/R Turnover 9.90 9.27 4.73A/P Turnover 9.12 14.25 5.10Inventory turnover 25.41 36.15 14.02Avg. Collection Period 36.36 38.82 76.09

INTEREST COVERAGE RATIO (IF > 5, HIGH QUALITY BORROWS)EBITDA Coverage ratio 2.93 3.57 2.48TIA(Time Interest Earned) 0.32 1.06 -0.72

OPERATING RETURNSROE -0.15 -0.01 -0.07ROA -0.040 -0.003 -0.022Asset turnover ratio 0.42 0.42 0.20Inventory turnover ratio 13.96 18.98 8.11

Tax rate = 34.93%

RETURN ON INVESTMENTEBIT 651 2,188 -661Book Value of Equity 21,710 25,312 25,584Net debt 57,121 54,407 54,147ROIC 0.54% 1.79% -0.54%

Table 37-Spring Financial Ratios

Page 85

Figure 62-Spring Liquidity Ratios

Figure 63-Sprint Profitability Ratios

0.000.200.400.600.801.001.201.401.60

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SPRINT - LIQUIDITY RATIOS


-0.20

-0.10

0.00

0.10

0.20

0.30

0.40

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SPRINT - PROFITABILITY RATIOS



Page 86

Figure 64-Sprint Activity Ratios

Figure 65-Sprint Interest Coverage Ratios

0.0010.0020.0030.0040.0050.0060.0070.0080.00

12/31/201512/31/201412/31/201312/31/2012

2015201420132012

SPRINT - ACTIVITY RATIOS


-1.00-0.500.000.501.001.502.002.503.003.504.00

12/31/201512/31/201412/31/201312/31/2012

2015201420132012

SPRINT - INTEREST COVERAGE RATIOS


Page 87

Figure 66-Sprint Operating Return Ratios

Figure 67-Sprint Leverage Ratios

VERIZON OPERATIONAL RESULTS (USD MILLIONS)

2015 2014 2013 201212/31/2015 12/31/2014 12/31/2013 12/31/2012

SALES 131,620 127,079 120,550 115,846COGS 52,557 49,931 44,887 46,235SG&A 32,496 33,909 33,599 32,145

EBITDA 46,567 43,239 42,064 37,466DA 16,017 16,533 16,606 16,460

EBIT 30,550 26,706 25,458 21,006I 6,088 5,667 4,175 3,383

-0.20

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

12/31/201512/31/201412/31/201312/31/2012

2015201420132012

SPRINT - OPERATING RETURNS RATIOS


0.00

0.50

1.00

1.50

2.00

2.50

3.00

12/31/201512/31/201412/31/201312/31/2012

2015201420132012

SPRINT - LEVERAGE RATIOS


Page 88

EBT 24,462 21,039 21,283 17,623T -9,865 -3,314 -5,730 660

NOPAT 14,597 17,725 15,553 18,283Table 38-Verizon Operational Results

AT&T OPERATIONAL RESULTS (USD MILLIONS)

2015 2014 2013 201212/31/2015 12/31/2014 12/31/2013 12/31/2012

SALES 146,801 132,447 128,752 127,434COGS 64,333 59,658 51,464 55,228SG&A 32,954 39,697 28,414 41,066

EBITDA 49,514 33,092 48,874 31,140DA 22,017 18,273 18,395 18,143

EBIT 27,497 14,819 30,479 12,997I 5,714 4,081 4,508 3,970

EBT 21,783 10,738 25,971 9,027T -7,005 -3,619 -9,224 -2,900

NOPAT 14,778 7,119 16,747 6,127Table 39-AT&T Operational Results

T-MOBILE OPERATIONAL RESULTS (USD MILLIONS)

2015 2014 2013 201212/31/2015 12/31/2014 12/31/2013 12/31/2012

SALES 32,053 29,564 24,420 19,719COGS 14,898 15,409 12,255 8,098SG&A 10,795 9,162 7,490 6,803

EBITDA 6,360 4,993 4,675 4,818DA 4,688 4,412 3,627 3,187

EBIT 1,672 581 1,048 1,631I 1,726 1,513 1,233 679

EBT -54 -932 -185 952T -245 -166 -16 -350

NOPAT -299 -1,098 -201 602Table 40-T-Mobile Operational Results

SPRINT OPERATIONAL RESULTS (USD MILLIONS)

2015 2014 201312/31/2015 12/31/2014 12/31/2013

SALES 34,532 35,500 16,891COGS 18,969 18,640 9,777SG&A 9,563 9,484 4,841

Page 89

EBITDA 6,000 7,376 2,273DA 5,349 5,188 2,934

EBIT 651 2,188 -661I 2,051 2,064 918

EBT -1,400 124 -1,579T 574 -224 -45

NOPAT -826 -100 -1,624Table 41-Sprint Operational Results

6. BIBLIOGRAPHY

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