I analyzed the telecom valuation multiples from a data set of 76 companies in the United States and Canada, and the result is as follows.
The median revenue multiple is 1.3x and the median EBITDA multiple is 8.7x.
My approach was the following – I first screened for public telecommunication services companies in the United States and Canada.
Then, I removed companies that had negative earnings or negative EBITDA.
And finally, I removed outliers as they were causing the sample set to be pulled in extremes.
Keep scrolling for the summary table of multiples.
Telecom Companies in the Data Set
The telecommunications services industry provides a range of services such as telephone and internet services, as well as mobile and satellite services.
Companies in this industry provide the infrastructure and technology needed to transmit voice and data signals, allowing people to connect in real time.
The industry is constantly evolving and developing new technologies, so it is important to use the most up to date telecom valuation multiples (within the last 1 year).
The most recognizable giant telecom companies in the United States that were used in this analysis include Verizon, Comcast, AT&T, and T-Mobile.
Also included are Canada’s most recognizable telecom companies, Telus and Rogers.
The data set also includes small, regional telecom companies, such as KonaTel, which you’d think is a Hawaiian telecom company but is actually in Texas.
Telecom Valuation Multiples
Below is the summary of revenue, EBITDA and earnings multiples for telecom companies:
Out of 70 companies, the median revenue multiple is 1.3x and the average revenue multiple is 1.7x.
As the size of companies becomes larger, the revenue multiple decreases slightly, but not meaningfully enough to rationalize the reason.
Out of 47 companies, the median EBITDA multiple is 8.7x and the average EBITDA multiple is 10.6x.
The average multiples are lowest for the smallest telecom companies with revenue below $50 million and for the largest telecom companies with revenue above $2 billion.
But with only 47 companies in the data set, it is not reliable to explain the reason for this.
Out of 33 companies, the median PE (price to earnings) multiple is 13x and the average is 15x.
If we take the enterprise value instead of the market cap to calculate the earnings multiple, the EV / earnings multiple is higher at a median of 18.5x and the average of 20.8x.
EV is when you remove cash and add debt. If the enterprise value is higher than the market cap, then the company’s debt is higher than cash.
This is an interesting observation in that as you might expect, telecom companies must have a lot of debt on their balance sheet in order to leverage the kind of infrastructure they need to build for telecom networks.
How To Use Valuation Multiples To Value a Company
Now that you have the valuation multiple, how do you use it to value a company?
For those who are not familiar with using valuation multiples to value companies, I wrote posts detailing exactly how you can do that.
Hopefully you can use them as helpful guides. Click on the link below to go to the post.
- How to value a company based on revenue
- How to value a company based on EBITDA
- How to value a company based on earnings
- How to find your own valuation multiples
- Other posts on how to value a company
Download Data Set
To download the 70 companies data set in this analysis, enter your email address below to sign-up for the mailing list and the data set will be sent to your email directly. In some cases, it takes a few hours or a day to receive the email with the data set.
(I have never sent an email to the mailing list, but I may in the future, who knows. But the reason for mailing it directly is because if you can download it with a click of a button, the internet bots go nuts.)
Thanks for reading as always and leave a comment if you found it useful!