Scott Moritz
Fri, July 14, 2023
(Bloomberg) -- AT&T Inc. shares hit an almost three-decade low Friday amid growing concerns of the potentially high costs the phone giant faces if it must clean up contamination due to lead-clad wiring throughout parts of its nationwide network.
The issue was exposed earlier this week in a Wall Street Journal story that pointed to leaching lead cables that were part of early landline networks built by phone companies in the first half of the 20th century. Those networks are now owned by several national carriers including AT&T, Verizon Communications Inc. and Lumen Technologies Inc.
AT&T shares fell 4.1% to $14.50 at the close in New York, their lowest price since February 1994. Verizon declined 1.8% and Lumen dropped 10%.
Industry analysts have been trying to calculate the potential costs and risks that may await the carriers.
With a service area that covers about 40% of US homes plus an extensive long distance network, “AT&T will have the largest exposure,” JPMorgan analyst Phil Cusick wrote in a note Friday. Citing the uncertainty around the outcome, Cusick cut his AT&T target price to $17 from $22.
The lead concerns add to an already challenging year for the largest US phone company. In April, AT&T reported $1 billion in free cash flow, missing analysts’ $3 billion target and setting off alarms for the second year in a row about dividend payments. Last month, the company warned that wireless subscriber growth was less than anticipated. The company also clumsily obscured a massive restructuring and job reduction effort behind a new return-to-work policy.
AT&T declined to comment. The company has referred questions about the lead situation to USTelecom, an industry group, which has created a website featuring several statements including a claim disputing the charge that phone cables are a leading cause of lead exposure. The group, which represents most US phone companies, says it’s “ready to engage constructively on the issue.”
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