Investors Await AT&T's Health Check

Investors will be closely monitoring AT&T (T)'s fourth-quarter results Wednesday to gauge the health of the telecom market.

Analysts estimatethat the telecom behemoth will report revenue of $31.35 billion and earnings of 65 cents a share at a time when few firms have visibility into their long-term performance.

AT&T, like its rivals Verizon (VZ), Sprint Nextel (S) and Qwest Communications (Q), faces the challenge of shrinking enterprise budgets and super-cautious CFOs.

Bank of America analyst David Barden explained that he will be looking to see how the economy is affecting AT&T's volume-based voice revenue, the migration to IP from legacy data systems, and, crucially, the company's forward-looking statements.

"We expect guidance to be less detailed than in the forecasts provided prior to 2008," he wrote, in a note released Tuesday.

Many companies, not just in the telecom sector, are struggling to project even short-term revenue. AT&T rival Verizon, for example, was unwilling to offer forward-looking revenue guidance in its fourth-quarter results, released Tuesday.

Investors reacted negatively to Verizon's fourth-quarter results, heralding a broader slump in tech stocks that saw AT&T's shares slip 90 cents, or 3.35%, to $25.93.

Set against this backdrop, Barden is also keen to measure the economy's impact on AT&T's wireless and wireline businesses, particularly after the latter proved problematic for Verizon.

"Key issues we are watching into the quarter [include] wireline performance and how wireless, cable, and the economy are impacting line loss relative to one another," he said, adding that Apple (AAPL)'s recent performance could also impact its AT&T partner. "Results from Apple imply that fourth-quarter iPhone [3G] sales fell short of the third-quarter launch period, in line with our expectations, which should push up margins sequentially."

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