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AT$T torpedoes its own stock, takes other telcos down too

By saveaccess
Created 01/16/2008 - 8:28am

from: Ars technica [1]

AT&T torpedoes its own stock, takes other telcos down too

By Jon Stokes | Published: January 09, 2008 - 11:22AM CT

When you're the CEO of a major telco addressing a room full of very jittery, subprime-weary financial analysts, and you respond to a question about the state of consumer spending by telling them all that you're having to disconnect customers because they can't afford to pay their landline and broadband bills, it's sort of like a theater-goer in a packed house responding to a question about "that smell" by shouting "Fire!"

By the time AT&T CEO Randall Stephenson had finished telling a Citigroup investor conference on Tuesday that "we're experiencing softness on the consumer side of the house from the economy," and buttressing that point by talking about cutting off phone service to cash-strapped customers, most of the assembled crowd clearly had their Blackberries in hand and were pecking out "sell" orders for AT&T stock. By the time Stephenson had finished speaking, shares of AT&T had declined by 10 percent. Ouch. Live by the wireless network, die by the wireless network.

By the end of the day Tuesday, AT&T had recovered some of its previous value, but the stock is still down in this morning's trading. Other telco stocks dropped percentages in the double digits on the news, as well, with Sprint-Nextel and Verizon both taking a hit.

Clearly, investors are freaked out by the specter of recession that hangs over the economy, and the suggestion that consumers can't even pay their phone bills caused a minor panic among a herd that's quite famous for group-think. But if you read the context of Stephenson's remarks, which Silicon Alley Insider was kind enough to transcribe, you can see that the poor man was trying to make a point about the robustness of AT&T's wireless business in the fact of a consumer spending slowdown, not spook the herd into dumping telco shares.

Stephenson was remarking on a shift in the way that consumers view their phone service: the all-essential wireless phone is now the last service to get dropped when household budgets tighten, while the landline is the first. Consumers are deciding that if they have to cut costs, they can get rid of their landline and their broadband connection, and just use their cell phone for everything.


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