Telecom stocks rebounded Wednesday after AT&T responded to Wall Street's worries over its possible exposure regarding lead-sheathed cables installed in phone networks. T stock gained over 8% as Wall Street analysts mulled an AT&T court filing.
Shares in Verizon Communications, Lumen Technologies and Frontier also rose on Wednesday. The telecom stocks lost a combined $18 billion in market value last week.
Last week, the Wall Street Journal reported telecom companies installed potentially dangerous lead-covered cables. The cables exist overhead on poles, in soil and underwater.
T Stock: Lake Tahoe Court Filing
In the court filing, AT&T said: "Although the Journal seeks to raise the specter of a broad public health issue, lead-clad telecom cables make up a small part of AT&T's network. Based on its records, AT&T estimates that lead clad cables represent less than 10% of its copper footprint of roughly two million sheath miles of cable, the overwhelming majority of which remains in active service."
AT&T added: "More than two-thirds of its lead-clad cabling is either buried or in conduit, followed by aerial cable, and with a very small portion running underwater. There are varying costs of installation, maintenance, and removal by cable type."
Also, the court filing involves litigation over lead-clad cables in Lake Tahoe, which straddles the California-Nevada border.
Wall Street analysts debate how much it could cost the phone companies to remove the lead-sheathed cables. Phone companies installed most of the cables before the 1960s.
AT&T Stock: Conference Call With Analysts
Meanwhile, AT&T hosted a conference call with Wall Street analysts Tuesday night.
T stock analyst Gregory Williams from TD Cowen estimated that AT&T will spend $246 million per year removing lead-sheathed cabling from networks.
"AT&T investor relations hosted an impromptu investor call laying out the framework on the toxic lead-clad cable risk," Williams said in a note to clients. "The framework suggests minimal health risk, minimal cable exposure, minimal financial risk and remedied over many years, if any risk at all. We view the (Lake Tahoe) case as highly constructive on all telco and tower stocks that were impacted."
Risk Seen At $84 Million A Year
At Raymond James, telecom stocks analyst Frank Louthan said in his note to clients: "AT&T is telling us that the total exposure is 200,000 route-miles or less. If it is determined that it all must be removed, we estimate the risk to T is something in the neighborhood of $84 million per year."
On the stock market today, T stock popped 8.5% to close at 14.59. VZ stock rose 5.3% to 33.97. LUMN stock shot up 16.7% to 1.89. And FYBR soared 26.3% to 15.28.
Meanwhile, analysts noted AT&T's criticism of the WSJ in its court filing.
"The company took several shots at the WSJ articles and its methods and processes of gathering its data, and highlighted several key potential conflicts of interest in the Journal's work for its articles," said Louthan.
Telecom Stocks: AT&T Criticism Of Reporting
At Goldman Sachs, analyst Brett Feldman noted that AT&T has decided not to proceed with the removal of the two telecom cables from the bottom of Lake Tahoe.
"According to the filing, AT&T has always maintained that its lead-clad telecommunications cables pose no danger to those who work and play in the waters of Lake Tahoe, but in 2021, AT&T agreed to remove them simply to avoid the expense of litigation," Feldman said.
He added: "However, recent reporting by the WSJ has placed these cables at the center of what it claims is a national public health crisis, according to the filing. The filing further states that based on AT&T's repeated testing of these cables, it has serious concerns with the WSJ's testing methods and the reliability of its results and reporting."
AT&T wants the U.S. Environmental Protection Agency to look into the issue.
Response From Dow Jones
Both IBD and the Wall Street Journal are owned by News Corp and operated by Dow Jones. A Dow Jones spokeswoman pointed to a Tuesday story from the Journal, which said AT&T erroneously identified the Environmental Defense Fund as the group that paid for its testing of the lead-sheathed cables.
"EDF didn't pay for testing used in the Journal's analysis and the Journal selected locations to test based on government permit records and additional reporting," the story said. "The Journal worked with Marine Taxonomic Services and other experts on sampling and selected independent laboratories for analysis of the samples. MTS has received guidance and funding from EDF."
As of Wednesday's market open, T stock had retreated 26% in 2023. Also, VZ stock was down 18%. Further, second-quarter earnings for Verizon stock are due July 25. Earnings for T stock are due July 26.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
