telecom operators EV/EBITDA low.

**pass** Thu Mar 02, 2006 4:19 pm

telecom operators EV/EBITDA low.
Blast,

Are you familiar with telecom industry? It is interesting to notice that
some big operators have very low EV/EBITDA ratio.
VZ is only 4.x and VOD is 5.x

Vodafone holds about half of Verizon wireless and also has lots of operations worldwide. The div yield is 4% currently.

**pass** Thu Mar 02, 2006 4:28 pm

CHL
Also how about China Mobile? What I like about China Mobile is that it is a dominant player in China and every month there are millions new subs, so the growth is better than Vodafone, which mainly operates in EU.

**blast_investor** Thu Mar 02, 2006 6:06 pm

Hi tongliu,

Cable or phone companies are very interesting. I would agree that some of their valuation is not that expensive.

By the way, Warren Buffett is also an investor in this sector. Warren owns Comcast shares.

**dahhuilaudavid** Thu Mar 02, 2006 7:12 pm

Just sharing with you what Warren Buffett mentioned about EBITDA.......

"It amazes me how widespread the use of EBITDA has become. People try to dress up financial statements with it."

"We won't buy into companies where someone's talking about EBITDA. If you look at all companies, and split them into companies that use EBITDA as a metric and those that don't, I suspect you'll find a lot more fraud in the former group. Look at companies like Wal-Mart, GE and Microsoft -- they'll never use EBITDA in their annual report."

"People who use EBITDA are either trying to con you or they're conning themselves. Telecoms, for example, spend every dime that's coming in. Interest and taxes are real costs." by Warren Buffett (2002 Annual Meeting)

All the best,
Dah Hui Lau (David)
http://dahhuilaudavid.blogspot.com/

**goog** Fri Mar 03, 2006 12:45 pm

I think EV/EBITDA is still a good metrics. It tells the operating prfitabilty of a company though not necessary tells cheapness.

Take VZ and GM as a example. GM was trading arround 40 with low PE arrond 6. VZ has been trading above PE 10. But if you check EBITDA, it is a different story. GM had very high EV/EBITDA. Any samll interest or tax charge, or debt credit downgrade or a little cost increase would put GM into very low profit or even a loss.

Having said that, I think Joe's ROC + EBIT/EV may be better metrics. But we need to check DA carefully for different companies.

**blast_investor** Fri Mar 03, 2006 7:42 pm

EV/EBITDA is good for valuing stocks in same industry. Across different industries, this metrics is no longer valid.

EV/EBIT is not necessarily better. Joel mentioned EBIT as EBITDA - CAPEX. The problem with EV/EBIT is the difficulty of calculating this under normalized fashion.

Without normalization, EV/EBIT can be misleading as well.

goog wrote:

Having said that, I think Joe's ROC + EBIT/EV may be better metrics. But we need to check DA carefully for different companies.