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Verizon Doesn't Fear Economy's Slump

Verizon Communications Inc. (NYSE: VZ) helped put some perk back into telecom stocks today, as chief operating officer Denny Strigl told analysts his company isn't seeing adverse effects from the slumping U.S. economy.

"I'm not sure what the hubbub has been out of this conference," news reports quoted Strigl as saying at a Citigroup investor conference in Phoenix.

The "hubbub" refers to the shock wave AT&T Inc. (NYSE: T) sent through the stock markets two days ago when CEO Randall Stephenson told the same conference that Ma Bell was "really experiencing softness on the consumer side of the house from the economy." (See Whoa Mama Bell!)

As a result of that softness, Stephenson said AT&T had to cut off telephone and broadband customers who weren't paying their bills. AT&T's shares sank nearly 5 percent immediately following those comments, and the rest of the U.S. stock market's major indices fell as a result.

Verizon's shares were up 98 cents (2.3%) at $43.45 today, while AT&T rose 40 cents (1%) to $39.40.

U.S. service provider stocks fared well for much of 2007. AT&T was up 16 percent for the year while Verizon's shares gained 20 percent. But toward the end of the year, concerns about the weakening U.S. economy -- particularly the slumping housing market -- caused some to fear that the telcos' businesses would eventually be exposed to the slowdown.

Embarq Corp. (NYSE: EQ) shares, for example, have taken a beating since the middle of 2007 because of its exposure to the poorly performing North Carolina and Las Vegas housing markets. (See Analyst: Embarq Is Cheap.)

Strigl did admit during his talk today that Verizon Wireless has seen a slight increase in bad debt due to higher exposure to prepaid customers, but also pointed out that it has the lowest amount of such debt compared to other carriers.

— Raymond McConville, Reporter, Light Reading

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