The Wall Street Journal-20080111-Verizon Says It Has Dodged Slow Economy
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Verizon Says It Has Dodged Slow Economy
Verizon Communications Inc. said it hasn't seen a discernible impact from the slowing economy, soothing investor worries about the potential impact of the housing crunch on the telecom sector.
"We've seen virtually no economic impact," said Verizon President and Chief Operating Officer Dennis Strigl, speaking at an investor conference. "I don't see it. Total access lines are fine."
AT&T Inc. Chief Executive Randall Stephenson startled Wall Street and rankled markets this week when he noted an uptick in "nonpay disconnects" in the fourth quarter of 2007. That reflects a drop-off in subscribers who can't pay their telephone or broadband bills. AT&T's shares dipped 4.5% and the news contributed to a broader market drop that day.
Verizon's Mr. Strigl said he wasn't "sure what all the hubbub has been about." He suggested that AT&T was especially affected because it operated in economically hard-hit Midwestern states.
AT&T spokesman Michael Coe declined to comment on whether the company saw especially high consumer disconnects in the Midwest. He said AT&T still expects to increase consumer revenue in 2008.
Amid a general upswing in the market, Mr. Strigl's comments sent Verizon stock up 98 cents to $43.45 in 4 p.m. New York Stock Exchange composite trading; AT&T shares gained 40 cents to $39.40.
In the past, big phone companies have served as a bellwether for the economy because landline phone service was one of the last things consumers would give up in hard financial times. That is less the case now due to the rise of cellphones.
Yesterday, Mr. Strigl noted that Verizon, the second-largest telecom provider behind AT&T, had seen an uptick in "bad debt" among its cellphone customers as it increasingly offers lower-income people "prepaid" services. He added that it hasn't seen any overall downturn in its wireless business.
Sprint Nextel Corp., the nation's third-largest cellphone company, told investors last fall that macroeconomic trends were one factor leading to a higher rate of consumer defections to other carriers. Cable provider Comcast Corp. blamed the economy for "softness" across the board in sales of its services in the third and fourth quarters of last year but noted this week that it still expects growth this year.
Charlie Ergen, CEO of satellite TV provider EchoStar Communications Corp., said in mid-November that economic weakness had hurt Echostar's ability to sign up video subscribers.
