Dropping to its lowest levels in 30 years, AT&T has been digging a hole deeper and deeper as of late. Especially since the news broke on July 9th that they, as well as Verizon and multiple other smaller companies, left lead-coated cables in place across the country.
First reported in The Wall Street Journal, numerous companies who participated in the Bell System’s takeover left lead-coated cables in the ground, water, and on transmission poles across the country. Since that report, telecom stocks have plummeted. AT&T has dropped 14%, Verizon 15%, and even reliable and much less associated with the cables Frontier Communications dropped 33%.
From the fallout of their crash, JPMorgan Chase and their analysts downgraded AT&T from ‘neutral’ to ‘overweight’ and dropped their target price from $22 a share to $17. They cited “the potential liability as an unquantifiable, long-term overhang for the stock.” This kind of change is never done lightly or on a whim, particularly at this brokerage.
AT&T has decried the findings and claims their research proves differently. “The scientific literature and reliable studies in the U.S. and abroad give no reason to believe that these cables pose a public health issue or a risk to workers when appropriate safety measures are in place.” Yet, Verizon and Frontier have had nothing to say on the matter.
Their failure to see the problem here should be troublesome to all investors. While the risk of lead-coated phone lines is real, the tone-deaf response by AT&T is disturbing. These cables are often neglected until they are irrevocably broken, and that takes a lot of work. Lines like these are often installed in rural communities and in places where people don’t notice an issue until it’s too late.