This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Long-Distance Runaround Leaves AT&T Winded

After years of dwindling numbers, AT&T's (T) withering consumer long-distance business has finally landed on Wall Street's endangered species list.

Once a profit center reaping $20 billion in annual revenue, the consumer business is now in peril and likely to be shut down or sold late next year, says Lehman Brothers analyst Blake Bath. In cutting the stock to sell from neutral Monday, the analyst says the company's business services unit retains some value but is being dragged down by the staggering home long-distance business.

The discouraging words come just as AT&T investors prepare to face the brave old world of pure-play telecom stockholding. Bath's report coincides with the carve-out of AT&T's cable business in a merger with Comcast (CMCSK) and an accompanying 1-for-5 reverse split of the remaining AT&T common shares. Those moves, expected to take effect later today, will reverse once and for all the company's four-year-old dalliance with the cable business and all the broadband synergies it once promised.

An AT&T spokesman declined to comment on the report, but Wall Street was bracing for a rough transition. AT&T shares, up more than 50% from their late summer low, fell 75 cents to $13.11 Monday.

Diminishing Returns

Severely challenged by cheap wireless calling plans and new long-distance offerings served up by the regional Bells, AT&T's consumer business has been evaporating at a rate of about 20% a year, according to the Lehman report. And despite the giant telco's efforts to cut costs, the revenue declines have been outpacing expense reductions.

Those trends will quickly turn what has been a cash cow even through the lean years into another source of red ink, Bath predicts. At the current rate, costs at AT&T's consumer business will start to exceed revenue sometime after the close of 2003, Bath says.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs