AT&T is taking a stand against concerns over potential liability for lead contamination from its copper telecommunications cables. Despite recent stock drops, both AT&T and Verizon Communications believe the market has overreacted.
In response to reports by The Wall Street Journal regarding health dangers associated with lead-sheathed cables, AT&T has decided to pause the removal of two such cables in Lake Tahoe. Instead, the company plans to conduct additional testing and engage in discussions with regulators.
AT&T is questioning the methods and findings presented by The Wall Street Journal in a court filing. The Journal’s report indicated higher lead concentrations than what AT&T’s own testing had revealed. Consequently, AT&T has decided to halt cable removal plans to ensure a thorough examination of the cables’ safety.
Verizon, on the other hand, has assured that it takes concerns about lead-sheathed cables seriously. The company is currently testing the sites mentioned in The Wall Street Journal’s report.
Financial analysts believe that the recent stock drops have been excessive. Even if AT&T were to bear a $35 billion cost for lead exposure and Verizon an $8 billion hit, both companies have sufficient resources to maintain their current dividends.
“While there have been numerous estimates ranging from $5 billion to $50 billion in terms of liability, we believe that the stock prices already account for a reasonable estimate,” stated Brandon Nispel, an analyst at KeyBanc, in a research note.
AT&T and Verizon Stocks Face Challenges Amid Lead Exposure Concerns
Investors are closely watching the telecommunications industry as lead exposure concerns continue to impact major players. AT&T and Verizon, two of the largest telecommunications companies in the United States, are now facing challenges related to lead cables and tough competition.
According to Oppenheimer analyst Timothy Horan, the total industry liability related to lead exposure is estimated to be between $2 billion and $20 billion. This news has already resulted in a $30 billion hit for the sector. Horan suggests that Verizon may be a safer investment than AT&T due to its lower lead exposure.
While AT&T experienced a significant increase in stock value, closing at $14.59 on Wednesday with an 8.5% increase, Verizon also saw a positive one-day percent increase of 5.3%, closing at $33.97. These gains come after both companies faced initial setbacks following reports about lead-clad cables.
Analysts at Raymond James expect that most telecom companies will have lower proportions of lead-clad cables in their networks compared to the estimated 10% for AT&T’s copper footprint. This has resulted in a positive response for other companies such as Frontier Communications, Lumen Technologies, Consolidated Communications Holdings, American Tower, and SBA Communications.
Looking ahead, Raymond James analysts believe that the required remediation efforts will be manageable for the industry over several years and will have minimal impact on capital expenditure for expanding high-speed connections through fiber and 5G wireless technologies.
As the telecommunications industry navigates these challenges, it is important for investors to carefully consider the implications of lead exposure and competition when making investment decisions.
