AT&T, Verizon Cope With Wireless World

The upcoming earnings reports of telecom giants AT&T (T) and Verizon (VZ) are expected to underscore the growing strength of their wireless divisions at the expense of their struggling landline operations.

With AT&T set to report third-quarter earnings Wednesday and Verizon to report its own the following Monday, the woes of their landline business segments should once again be on full display, as cash-pinched customers have continued to disconnect home phone access lines in favor of wireless connections.

"We think the incremental pressure on residential access lines is more of a function of wireless substitution (with consumers cutting the cord to save money) than incremental competition from cable," writes Chris Larsen, research analyst with Credit Suisse, in an earnings preview.

The shares of Verizon and AT&T have been under pressure since last they reported earnings in late July. AT&T has slid 20% and shares of Verizon are down 21% over the last three months.

Fear over landline losses has prompted analysts to reduce estimates for third-quarter profit, especially given current macroeconomic conditions.

According to Thomson Reuters, analysts have reduced estimates for earnings per share and revenue for both companies over the last month. Analysts on average are expecting AT&T to post a profit of 71 cents a share on revenue of $31.1 billion. Verizon is expected to post a profit of 66 cents a share on revenue of $24.5 billion.

The trend of landline losses is nothing new. In its last quarterly report, AT&T said total connections fell 8.1% from the year ago period, worse than many anticipated.