Of course, LVLT's capital spending is not based on today's revenues, but tomorrow's. But prices paid for transmitting data over fiber will drop as capacity increases. And no one really knows how much bandwidth consumers and businesses want. As a result, coming up with an estimate for future revenues is little more than a guess. The company already sells for 10 times those guest-timated revenues.
Investors have high stakes bets on other telecom newcomers as well.
That means the group is selling for well above one times nationwide local phone service revenues. The same group trades for 2.3 times U.S. wireless revenues. Although bulls may argue that you can't compare new era telecom market values to today's voice revenues, no one expects the IP business to develop in isolation. Rather, new IP technologies will replace old style voice and data traffic, indicating that total communications revenues may not experience especially rapid growth. Regardless, uncertainty regarding industry growth and which players will be left standing has done little to depress the valuations of telecom favorites.