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AT&T, Verizon Investors Have More Than Lead Cables to Worry About


Shares of AT&T are down 20% over the past year after briefly hitting a 30-year low.
Photo: Jeenah Moon/Bloomberg News

Big telecom companies are working to reassure investors about two burdens: toxic lead and heavy debt.

Questions about the latter will linger in the background this week as
use their quarterly earnings reports to address more immediate questions about lead-lined cables. Both companies inherited a web of aging telephone lines from their predecessor companies but reap almost all of their profits from more modern fiber optics and cellphone connections. 

On paper, wireless companies should be thriving: Americans are glued to their smartphones, federal subsidies are plentiful and the stock market is surging.

In the market, companies like
look less healthy. The two cellphone carriers were among the worst-performing stocks in the S&P 500 index during the first half of 2023—well before a Wall Street Journal investigation on aging telephone networks rattled already-wary investors.

Verizon’s debt load soared after the company spent a record sum snapping up wireless spectrum licenses to enhance its 5G connections.
Photo: Victor J. Blue/Bloomberg News

AT&T shares are now down 20% over the past year after briefly hitting a 30-year low. Verizon is off 24% over the same time. The S&P 500 has meanwhile gained 15%.

“AT&T and Verizon were already facing challenges related to capital structure, cash flow generation, unit and revenue growth, and so on,” telecom research firm MoffettNathanson wrote in a recent note to clients. “Add lead to the list of reasons not to be excited about their stories.”

Investors have been left to guess about the industry’s potential environmental obligations and any legal liabilities. Wall Street analysts earlier this month pegged the potential nationwide costs of ripping out the lead-clad wires as high as $59 billion and as low as $1 billion. Some have altered those estimates in recent days as new information helps refine their models.

AT&T said lead-clad lines are less than 10% of the 2 million miles of sheathed copper cable in its network. AT&T Chief Executive

John Stankey
wrote in a note to employees that “the Journal’s reporting conflicts with what independent experts have long stated about the safety of lead-clad telecom cables and our own environmental testing” and that the company would work with stakeholders to address any new safety concerns.

Verizon has said that it is “taking these concerns regarding lead-sheathed cables very seriously” and that such cables represent a small percentage of the roughly 540,000 miles of lines in its copper network. 

USTelecom, an industry trade group, has said that available research shows lead-sheathed cables aren’t a public-health issue or a risk to workers when precautions are used. Analysts at
have downgraded AT&T; others have called the selloff overdone.
Wells Fargo
called the past week “a significant market overreaction that creates a buying opportunity for a stock that was already, in our view, undervalued.”

Telecom investors have nevertheless soured on U.S. cellphone carriers in recent years as promises of explosive growth from 5G technology didn’t materialize. Customer surveys and the companies’ own earnings have shown that smartphone users aren’t willing to spend more for the faster internet links. 

AT&T’s debt ballooned after its purchases of DirecTV and Time Warner and eased after Stankey sold most of its entertainment assets and slashed its stock dividend. Its reported net debt earlier this year stood around $135 billion.

Verizon’s debt load likewise soared after the company spent a record sum snapping up wireless spectrum licenses to enhance its 5G connections. The company’s net unsecured debt totaled $130 billion at the end of March.

Both companies have outlined plans to whittle down their obligations over the coming years as they pay out billions of dollars in stockholder dividends.

AT&T and Verizon still offer credit investors all-important financial stability, but their debt and dividend commitments leave them with little cash to maneuver when an unexpected shock spooks their shareholders.

“The equity investors had a knee-jerk reaction,”
Investors Service senior credit officer Emile El Nems said, adding that the companies’ steep financial leverage “makes the reaction more severe.”

Rival cellphone carrier

dodged the past week’s selloff because it doesn’t own old landline infrastructure. The younger company doesn’t pay a dividend either, instead steering cash toward shareholder-pleasing stock buybacks in lean times.


Will federal spending change the way you look at investing in telecommunications companies? Join the conversation below.

Telecom companies will catch a break as they wind down their heaviest spending on upgrades to support faster 5G connections. Verizon said the $23 billion it allocated last year toward capital expenditures was a high-water mark, and AT&T has said its comparable spending will peak this year around $24 billion.

The past year has given bullish telecom investors little comfort. Verizon, the biggest cellphone carrier by subscribers, has seen its customer base erode, prompting the company to shake up the way it charges for wireless plans. AT&T’s stock tumbled earlier this year after it delivered much lower free cash flow than analysts had expected. 

Telecom companies enjoyed a flood of pandemic-era subsidies the federal government issued to keep Americans connected during the crisis, yet that boost faded last year as U.S. officials wound down the programs.

Federal officials have since replaced emergency wireless payments with the more permanent Affordable Connectivity Program, a federal voucher that foots up to $30 of a qualifying customer’s monthly phone bill. Analysts say that program, while open to a large pool of Americans, hasn’t driven up subscriber numbers as quickly as the emergency subsidies did.

Write to Drew FitzGerald at

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