The Bells seem to have scored another win with AT&T's ( T) decision to throw in the towel on the consumer phone game.
Shares of the big local phone giants -- Verizon ( VZ), SBC ( SBC) and BellSouth ( BLS) -- have risen more than 4% since Thursday in the wake of Ma Bell's residential retreat. Now industry watchers look ahead to Verizon's second-quarter earnings report Tuesday for signs that the local phone giants can achieve another victory. Some observers expect Verizon to show progress toward reclaiming its turf and, at least for now, reversing a 3-year-old line-loss trend. Great gains in wireless subscribers have eased the painful erosion of Verizon's core phone business, as reflected in the company's access line count. The continued success of Verizon Wireless, a joint venture between Verizon and Vodafone ( VOD), is expected to be a big part of the company's results. (On Monday, Vodafone's earnings report pointed to a stronger-than-expected subscriber-addition trend at Verizon Wireless.) But some analysts are hopeful that Verizon can show it has slowed the access line declines -- or even turned the tide around. The Bells passed a troubling milepost in 2001, when, for the first time in history, the number of total phone lines actually shrank. The rate at which consumers were switching to wireless service, and canceling second home lines, suddenly began to outpace new customer additions. The shift began a slow erosion of revenue for the Bells, and it has cost the group more than a third of its market value over the past three years, as investors grew pessimistic about the sector. SBC reported Thursday that its consumer line count dropped by 558,000 in the second quarter ended in June. The decline was made worse by shutoffs as college students left school for the summer. The recent slide, while greater than the 305,000 decline in the first quarter ended in March, is an improvement from the 721,000 lines lost in the year-ago period.
Even though AT&T tried a last-minute bribe of promising 5,000 new U.S. jobs to help gain support for the deal, the Justice Department filed a complaint to fight the combination of the nation's No. 2 and No. 4 wireless carriers.