At the early part of 2012, Moffett took exception to telecoms like AT&T, Verizon and Sprint (S) as investments, ahead of their outperformance through the first half of the year on strong wireless earnings and M&A speculation.
In particular, Moffett highlighted earnings-wrecking Apple iPhone 5 subsidies, margin declines, pension liability and capital spending as reason for caution, amid the sector's outperformance.
While Moffett's view proved mistimed for much of 2012, a recent string of analyst downgrades thanks to AT&T and Verizon's expected declines in wireless margins and both companies' recent underperformance, supports the underlying analysis.
As part of AT&T's Thursday 8-K filing, the carrier also disclosed it sold 10.2 million iPhones in the fourth quarter, more than previous analyst estimates. The disclosure caused Moffett to further cut his earnings estimates for AT&T and Verizon, in a Friday analysis.While the analyst's bearish 2012 analysis of the telecom sector is likely to finally play out in fourth-quarter earnings next week, it might also set the stage for another strong year for the telecom sector. Evercore Partners analyst Jonathan Schildkraut wrote in earnings previews that a fourth-quarter miss on iPhone subsidy costs could represent a buying opportunity for AT&T and Verizon investors. After taking in AT&T's disclosure, which also contains $175 million in Hurricane Sandy related operating charges, Schildkraut reiterated that perspective. "
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