Density Matters When Building Networks

Many cross-national studies suggest digital infra costs for access networks are higher than typical in the U.S. market. As always, there are reasons. Networks covering only dense cities require less capital, overall, than networks covering large or continent-sized countries. 

Networks covering largely rural areas cost far more than networks mostly covering urban areas, as the cost of a mile of infra varies inversely with population and housing density. 

Population Density	Cost per Mile
Urban (>10,000 people per square mile)	$60,000-$80,000
Suburban (2,500-10,000 people per square mile)	$75,000-$100,000
Rural (250-2,500 people per square mile)	$100,000-$125,000
Highly Rural (<250 people per square mile)	$125,000-$150,000

City states have the highest density. Other countries such as Australia and Canada have very low densities. Density can vary by five orders of magnitude. One also has to correct for currency and cost-of-living metrics between countries as well.

Country	Population Density (people per square kilometer)
Macao (China)	21,338
Monaco	17,285
Singapore	8,251
Hong Kong (China)	6,725
Gibraltar (UK)	4,807
Bahrain	1,909
Maldives	1,746
Bangladesh	1,330
India	425
China	150
United States	33.9
Canada	4.1
Australia	3.2
United Kingdom	277
France	122
Germany	233
South Africa	55
Malaysia	95
Thailand	75
Nigeria	222
Saudi Arabia	16

If You Had a Choice, Which of These Other Debt-Reliant Industries Would You Prefer to Work In?

If you had a choice, would you rather operate in the connectivity service provider, passenger airline, banking, pharma or retail industries. That actually is a better way of describing possible preferences among industries that require lots of debt, rather than comparing such industries to capital-light industries such as software. 

Connectivity service providers are fond of comparing themselves to app providers, but that is not so instructive. The better comparison is with other industries that require lots of capital. Looked at that way, connectivity service provider businesses do not fare unfavorably. 

Sure, debt is always a key issue for the capital-intensive connectivity industry. But some other industries also face similar capital intensity or borrowing-intensive business models. So telcos are not unique in requiring debt management skill. Nor are telcos and connectivity providers unusually challenged, compared to many other industries that also require lots of debt issuance. 

Company	Debt ($B USD)	Debt to Equity Ratio	Debt to EBITDA Ratio	Debt to Revenue Ratio	Debt to Cash Flow Ratio
AT&T	175.2	1.3	1.7	0.4	0.9
Verizon	156.8	1.2	1.5	0.4	0.8
China Mobile	180.8	1.1	1.4	0.3	0.7
NTT	129.6	1.0	1.2	0.2	0.6
Deutsche Telekom	115.2	0.9	1.1	0.2	0.5
Orange	76.8	0.7	0.9	0.2	0.4
BT Group	67.2	0.6	0.8	0.2	0.3
Singtel	57.6	0.5	0.7	0.1	0.3
SoftBank	56.0	0.5	0.7	0.1	0.2
America Movil	50.4	0.4	0.6	0.1	0.2
Telefonica	48.0	0.4	0.5	0.1	0.2

Granted, connectivity networks are capital intensive. But some other industries also are capital intensive, while some are far less capital intensive (such as software). 

Industry	Debt to Equity Ratio	Debt to EBITDA Ratio	Debt to Revenue Ratio	Debt to Cash Flow Ratio
Telecommunications	0.9	1.1	0.2	0.5
Airlines	2.0	2.5	0.5	1.0
Banks	1.5	1.8	0.4	0.8
Retailers	1.0	1.2	0.2	0.5
Pharma	0.6	0.8	0.1	0.3
Meta	0.5	0.6	0.1	0.3
Apple	0.3	0.4	0.05	0.2
Alphabet	0.2	0.3	0.05	0.1
Microsoft	0.1	0.2	0.03	0.1

Revenue and cash flow, in relation to debt burdens, is what matters.