AT&T, Verizon: Weak Economy Pressuring the Bells?

UBS telecom analyst John Hodulik today cut his ratings on both AT&T (T) and Verizon (VZ) to Hold from Buy, asserting that “the weak economy is pressuring wireline fundamentals at the Bells more than expected.” He expects to see accelerating line loses, weaker broadband adds and slowing growth in small- medium-sized businesses. Hodulik also says the wireless segment will get more competitive once Apple’s (AAPL) 3G iPhone hits the shelves next month at its new $199 price point.

For AT&T, Hodulik cuts his price target to $39 from $42; his 2008 EPS estimate goes to $3.17, from $3, factoring in the dilution from the revised iPhone business model, which requires subsidies from AT&T. For 2009, he goes to $3.27, from $3.50.

For Verizon, his target drops to $40, from $41. He now sees 2008 EPS of $2.58, down from $2.62. For 2009, he goes to $2.80, from $2.86.

Hodulik maintains his Neutral rating on Qwest (Q), but cuts his target price to $4.25, from $4.75.

Verizon today is down 93 cents, or 2.49%, at $36.40. AT&T is off 68 cents, or 1.83%, to $36.02. Qwest is down 2 cents, at $4.20.

Comments

[CS]

Verizion's FIOS TV service revenues I think will be a big plus.
I live in a surburb of Boston and just about ever home on my street
just recently converted from Comcast to FIOS.
Verizon even had people on weekends visiting in person to help with
FIOS. Major push by Verizon on implementating the FIOS.

It has been said by Corning that TV sales always go up in recession And I think Verizon/FIOS will be benefit from people spending on
things to do at home due to gas prices.