In a shocking development, AT&T, the telecommunications giant, experienced a steep decline in its share price, plummeting nearly 7 percent to reach its lowest level in three decades. The decline comes in the wake of a news report revealing that AT&T, along with other telecom giants, had left toxic lead cables buried across the United States.
The report, published by The Wall Street Journal on July 9, disclosed that AT&T and Verizon were among several companies that abandoned an extensive network of underground lead cables. Disturbingly, many of these cables have the potential to contaminate nearby soil and drinking water sources, raising serious environmental and health concerns.
AT&T in a news statement said: “We have managed legacy lead-clad cables in compliance with applicable laws and regulations, and we have followed industry-wide best practices to maintain this legacy infrastructure in a way that’s safe for all based on established science.”
“Based on information shared by The Journal, it appears that certain of their testing methodologies are flawed and one of the companies responsible for the testing is compromised by a conflict of interest,” AT&T said.
Following the news report, analysts at Citigroup and JPMorgan downgraded their recommendations on AT&T shares, exacerbating the decline in the company’s stock value. The share price has already experienced a 25 percent decrease since the beginning of this year, with a further drop of over 12 percent observed since the publication of The Wall Street Journal report. On Monday, AT&T’s shares hit a low of $13.68, marking the lowest point since March 1993.
Analysts at Citigroup, led by Michael Rollins, expressed concerns regarding the significant financial risks AT&T may face due to its exposure to the toxic lead cables. As AT&T’s network reaches approximately 40 percent of households in the United States, the extent of the potential liability remains uncertain, creating an ongoing risk for the company’s stock. Consequently, Rollins reduced his rating on AT&T’s stock from “buy” to “neutral” and slashed the price target from $22 to $16.
In response to the situation, AT&T has not yet provided an official statement in response to a Reuters request for comment. Meanwhile, U.S. Telecom, a lobbying group representing AT&T, Verizon, and other telecom firms, highlighted the complexities involved in deciding whether to remove or leave buried cables. The group emphasized that there is currently no evidence indicating that the “legacy lead-sheathed telecoms cables” are the primary cause of lead exposure or a public health issue.
Philip Cusick, leading a team of JPMorgan analysts, downgraded their rating on AT&T from “overweight” to “neutral” on Friday. Cusick cited concerns regarding downward revisions in the company’s wireless and fiber growth businesses, the high interest rate environment, and the newly emerged uncertainty surrounding the lead-sheathed cables.
Although industry experts have acknowledged the need for vigilance, Morningstar analyst Michael Hodel expressed his belief that the telecom industry is unlikely to face substantial legal liability due to this situation. Hodel stated, “This situation warrants watching, but we don’t expect the telecom industry will bear substantial legal liability.”
Verizon, another major telecom player, also experienced a decline in its share price, falling 5.5 percent to $32.14 on Monday. This drop marked a nearly 13-year low for Verizon’s stock, which has declined over 10 percent since The Wall Street Journal report was published.
Investors and industry observers will closely monitor AT&T’s response to this alarming situation, as the company navigates the potential financial and reputational consequences associated with the abandoned toxic lead cables.