Financial Performance Evaluation
Verizon Wireless vs AT&T

Dattatraya a Chidrawar

Financial Performance Evaluation

Professor Izzet Kenis
Accounting for Managerial Decisions
Rutgers MBA

1

 Background
1) Verizon Wireless
Verizon Communications Inc. (Verizon), incorporated on October 7, 1983, is a holding company. The Company is a provider of communications, information and entertainment products and services to consumers, businesses and governmental agencies. It operates in two primary segments: Verizon Wireless and Wireline.
Verizon Wireless’ communications products and services include wireless voice and data services and equipment sales, which are provided to consumer, business and government customers across the United States. Wireline’s communications products and services include voice, Internet access, broadband video and data,
Internet protocol network services, network access, long distance and other services. The Company provides these products and services to consumers in the
United States, as well as to carriers, businesses and government customers both in the United States and in over 150 other countries worldwide. In March 2012,
Verizon Wireless purchased the operating assets of Cellular One of Northeast
Pennsylvania from United States Cellular Corporation. In July 2012, it acquired
HUGHES Telematics, Inc. In November 2013, Verizon Communications Inc's
Verizon Digital Media Services acquired upLynk, a technology and television cloud company. Effective January 6, 2014, Verizon Communications Inc. acquired
EdgeCast Networks Inc. In February 2014, Verizon Communications Inc. completed the acquisition of Vodafone Group Plc's 45% indirect interest in Verizon Wireless.

Financial Performance Evaluation

2) AT&T

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AT&T Inc. (AT&T), incorporated on October 5, 1983, is a holding company. The
Company is a provider of telecommunications services in the United States and worldwide. The services and products offered by the Company include wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, telecommunications equipment, managed networking, wholesale services and directory advertising and publishing. AT&T operates in three segments: Wireless, Wireline, and Other. The Company’s
Wireless subsidiaries provide both wireless voice and data communications services across the United States, and through roaming agreements, in a substantial number of foreign countries. Wireline subsidiaries provide primarily landline voice and data communication services, AT&T U-verse TV, high-speed broadband and voice services (U-verse) and managed networking to business

customers. AT&T’s other segment includes customer information services
(operator services) and corporate and other operations. On May 8, 2012, AT&T sold its Advertising Solutions segment. In December 2013, AT&T announced that it had closed the transaction to lease rights to approximately 9,000 of its Companyowned wireless towers to Crown Castle International Corp., as well as the sale of approximately 600 AT&T towers. In March 2014, the Company completed the acquisition of prepaid wireless provider Leap Wireless International Inc.
 Financial Analysis
Profitability Measures and Ratios
Verizon
Wireless

Ratio

Financial Performance Evaluation

In Millions of USD

3

2013

2012

AT&T
2011

2013

2012

2011

ROE

12.70%

1.02 %

5.60 %

19.91 %

7.34 %

7.46 %

ROA

4.61 %

0.38 %

2.09 %

6.63 %

2.67 %

2.91 %

Operating
ROA

12.80 %

5.78 %

11.18 %

11.08%

4.79 %

6.82 %

Financial
Leverage

2.75

2.65

2.68

2.99

2.73

2.56

ROS

9.53 %

0.75 %

2.17 %

14.17 %

5.70 %

3.11 %

Operating
ROS

26.52 %

11.36 %

11.62 %

23.67 %

10.20 %

7.27 %

Asset
Turnover

0.43

0.51

0.48

0.46

0.47

0.47

62.76 %

60.09 %

58.62 %

60.03 %

56.66 %

56.67 %

Gross Profit
Margin

A profitability ratio is a measure of profitability, which is a way to measure a company's performance. Profitability is simply the