Are Telcos Properly Valued In The Financial Markets?

CEDAR KNOLLS, NJ —- Assigning valuations to carriers is proving difficult for world financial markets. Wireless carriers have been given premium valuations, while carriers relying on landline services have seen their valuations plummet. Financial markets are confused by the incumbents, who have both growing and declining businesses.

"A crucial issue for investors is valuing incumbent, multi-service carriers," comments Allan Tumolillo, COO of Probe Financial Associates, an independent financial analyst firm. "If the wireless portion of these carriers increases substantially in value, there will be demands to separate it from the landline business, meaning the end of the RBOCs as we know them."

There are steps that the RBOCs can take to increase their valuations. "The RBOCs bundling strategies, once a defensive weapon used to stem the loss of customers to wireless, can now be used as an offensive weapon," continues Tumolillo. "If the RBOCs can add satellite distribution, they will be able to offer bundles including wireless, wireline, internet access and television."

PFA's new report, "What's A Telco Worth? An Assessment of the Carriers" explores the issue of valuation for large carriers.
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