- By recognizing all of the revenue due from smartphone installment plan payments up-front, AT&T (NYSE:T) is "dramatically inflating EBITDA and earnings," argues industry analyst Craig Moffett. "Without the accounting distortions, AT&T’s EBITDA growth is falling by double digits; in Q3, the company’s YoY earnings would have fallen by 17%."
- The revenue recognition policy is one reason AT&T is expected by the Street to see its EPS rise 3% this year to $2.57, even as the company forecasts its free cash flow will drop 19% to $11B. Buybacks are another.
- Moffett, who has cut his AT&T target by $2 to $31, is also concerned about the bill attached to the FCC's AWS-3 spectrum auction. "In order to earn even a modest return on the $38 billion bid in the auction, the Big Four carriers will need to generate an incremental $1.40 per month of wireless revenue for every man, woman, and child in America. In perpetuity."