Telecom Debt

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Telecom Debt

It's amazing how much debt there is in telecom.

AT&T and its assorted subsidiaries owe $65B.

According to Zacks, "the Debt to Asset ratio shows the proportion of a company's assets that are financed through debt. If the ratio is greater than one, most of the company's assets are financed through debt." Zacks lists a few telecom companies:

SAVVIS (NASDAQ:SVVS) has a Debt/Asset ratio of 0.65x based on total debt of $783.8 million. [Savvis was signed an LOI with CenturyLink, which has a ratio of 0.75.]

Equinix (NASDAQ:EQIX) has a Debt/Asset ratio of 0.46x based on total debt of $2.1 billion, according to Zacks, but 1.04 according to Y-Charts.

Earthlink (NASDAQ:ELNK) has a Debt/Asset ratio of 0.39x based on total debt of $598.2 million.

Just a lot of debt in our industry, which is what caused the telecom meltdown at the beginning of the century.

Recently, the latest version of Birch Communications completed debt financing of $77.5M, for a company with $169M in revenues in 2009 according to INC5000. It also completed a $100M debt offering in 2010. Birch is one of the fastest growing companies in Atlanta, but it costs money to grow, especially for a VoIP company.

I'm not a finance guy, but when most revenues are flat -- and worse margins are shrinking because of a price war that has been raging for years -- and growth is mainly through acquisition, as an agent, I am watching the numbers of my partners closely. One BK filing and my life gets real interesting.

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