AT&T is expected to show weakness in its earnings report this week, with accelerated line loss in the wireline space and with reduced mobile profits.
The WSJ article blames this on the economy, but there is little evidence from past economic slumps, even recessions, that consumers cut back on telecommunications services. Most have contracts that set their spending in any event.
We believe this is a more general problem with AT&T. The company is more vulnerable to mobile revenue caps than Verizon because U-verse is a less valuable and profitable property. It is also more vulnerable to cable competition in voice and broadband, and we believe that the cable companies are targeting AT&T specifically because they need some success against the RBOCs.
The key will be what AT&T says about spending; it will show where the company believes future must lie.