Verizon and AT&T Stocks Plummet Amid Cleanup Concerns


Both Verizon Communications (VZ) and AT&T have experienced a significant decline in their stock value this week. This comes as markets grow increasingly apprehensive about potential litigation and the associated costs of cleaning up lead-sheathed cables. Investors are now eagerly awaiting the companies’ earnings reports, while analysts continue to assess the outlook.

Throughout this week, the stocks’ values witnessed further decline as various analysts, including those from J.P. Morgan and Raymond James, released research estimates on cleanup costs. However, many details remain uncertain at this stage, such as ownership of the cables and liability.

New Street Research recently provided fresh projections regarding the potential cost for Verizon to clean up the lead cables. Last week, the firm was among the first to estimate telcos’ liabilities. They now suggest that, in a worst-case scenario, Verizon might have to pay $5.2 billion. However, costs could also be as low as $500 million if they are only required to replace cables in the air or underwater, rather than all lead-sheathed cables as a whole. Initially, New Street Research projected an estimated cost of $8 billion for Verizon’s cleanup efforts.

USTelecom, a telecommunications trade association, has informed us that whether the cables are removed or left in place will depend on factors such as their age and composition, environmental impact, and worker safety considerations.

According to Oppenheimer analyst Timothy Horan, AT&T’s legal and financial exposure is estimated to be less than $5 billion. However, the exact amount cannot be determined for a significant period of time. On the other hand, New Street has projected a cost of $6.5 billion for AT&T.

The market value of AT&T has suffered more than the estimated cost due to investor concerns. New Street’s Jonathan Chaplin explained that until there is evidence indicating otherwise, it is expected that the equity market will assume the worst-case scenario.

Investors are worried that AT&T may not only have to bear the expenses of removing lead-sheathed cables, but also face legal claims from workers handling the lead, as well as property owners and environmental activists who have expressed concerns about the cables.

An environmental group called the California Sportfishing Protection Alliance filed a lawsuit in January 2021 against AT&T’s subsidiary, Pac Bell, to remove two lead-clad cables that were abandoned at the bottom of Lake Tahoe decades ago. AT&T had initially agreed to remove the cables at a cost of up to $1.5 million, but they have halted their plans until further data is collected, as stated in a recent court filing.

The negative sentiment surrounding AT&T and Verizon stocks has also been fueled by public letters from Democratic Party Congressman Pat Ryan and Sen. Edward Markey, who demanded answers from both companies.

Verizon has expressed its commitment to addressing these concerns seriously, while AT&T has stated that it has diligently followed government guidelines to ensure the protection of its workers.

Given the uncertainty surrounding the potential costs, any statements from management will be closely scrutinized. Verizon is set to disclose its earnings on July 25, followed by AT&T on July 26.

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