If you haven't noticed, the financial system is back at work creating debt bubbles around the world — and there's a debt bubble building at North America's largest telecom operators.

This leaves me wondering: What exactly is the strategy? More than $100 billion dollars in debt has been issued by Verizon and AT&T over the past few years, all in the name of growth. But the path forward for shareholders is not clear. The debt binge has resulted in a host of confusing acquisitions at the same time that growth in the mother's milk of telecom profits — wireless data fees — is slowing.

Let's take a careful look at the growth strategies of two of the world's largest operators — AT&T and Verizon — to see what we can glean about the future of Big Telecom, at least in North America.

Verizon has spent billions consolidating and growing its wireless assets while shedding many underperforming wireline assets. It has also invested in consumer fiber through the growth of its FiOS service. In 2014 paid $130 billion to acquire its outstanding wireless stake from Vodafone and this year it paid $4.4 billion for AOL, the Internet company from the 1990s bubble.

AT&T has been spending as well. This year it paid $49 billion to acquire DirectTV and made public statements saying its growth will come in the form of integrated triple-play services offered by U-verse and DirectTV. It's also touting the combined cost reductions brought about by its Domain 2.0 technology plan, bringing software defined networking (SDN) and network functions virtualization (NFV) to the forefront. AT&T has also acquired Iusacell and Nextel Mexico in the last year, for International expansion. Oh, and in February, it paid $18.2 billion for new Advanced Wireless Services 3 (AWS-3) Spectrum.

Both companies have levered up their balance sheets to pay for their shopping sprees. Since 2012, according to SEC filings, Verizon's debt level has climbed to more than $110 billion from $45 billion. AT&T's has climbed to $105 billion from $66 billion.

[caption id="attachment_26668" align="aligncenter" width="300"] Long-term debt for AT&T and Verizon has risen to more than $100B each.[/caption]

Verizon's big debt bubble accelerated when it decided in 2014 to pay for Vodafone's 45 percent stake in Verizon Wireless, valued at $130 billion. The deal was done with a mixture of cash and shares, but Verizon had been issuing lots of debt to pay for the deal. AT&T loaded up in debt to help pay for the $49 billion DirectTV deal, issuing $17.5 billion in debt in April.

Investors have been worried about the rising debt. The Wall Street Journal last December pointed out that AT&T's credit-default swaps, which insure investors against credit default, had been rising, indicating more fear about the debt load. That was before its debt and leverage jumped on the back of the $49 billion DirectTV deal.

These are gargantuan bets. Will any of them pay off?

As the survivor of several telecom busts, this does not make me feel comfortable. Highly leveraged telcos don't have a good track record of living up to the expansion promises of their new investments. And so far, results promised by heavier balance sheets aren't impressive. Take a look at Verizon's per-share earnings over the past three years: 2013, $4.00 per share; 2014, $2.42 per share; and for 2015, analysts estimate $3.94 per share. That seems like a whole lot of activity for zero profit. Verizon executives have recently guided for flat profit growth.

“This is a great day for Verizon,” Verizon CEO Lowell McAdam said in a statement after the Vodafone deal in 2014. “The new Verizon now has full ownership of the U.S. wireless industry leader in network performance, profitability and cash flow.”

The only problem is that profitability appears to have not changed.

AT&T's cash flow from operating activities fell from $40 billion in 2012 to around $31 billion in 2014, according to financial filings. It will take a few quarters for the nickels to shake out of the DirectTV deal to see where it stands now, and investors will be watching carefully. That deal has had many critics.

And it's all about to get harder. In North America, price wars with the pesky T-Mobile and Sprint mean wireless pricing is constantly under pressure, though it doesn't yet appear to be helping my bill as my teenagers scarf up as much data as possible. And Apple's move to unbundle iPhones threatens to take reduce the leverage the North Americans hold in mobile equipment sales.

It appears financial risk and pressure are rising across the sector. Earlier this month, Moody's cut Sprint's credit rating to B1 from B3, six notches below investment-grade. Following AT&T's high spectrum bid in February, Moody cut the rating on AT&T’s senior unsecured debt rating to Baa1 from A3. It has a negative outlook on the company.

If you are a telco equipment supplier, you know where this story leads: More financial pressure and more competition for fewer dollars means lower margins, as AT&T and Verizon have also lowered their capital spending plans.

The one bright side of this is that the financial pressure is going to drive more interest in SDN and NFV technology that promises to reduce cost and drive new revenue.

My advice to technology vendors: Prove you can do both of these, and then put it on the first sales slide. As the North American telecom companies get levered up, they're going to be looking for technology innovation to lower costs and launch new services.