Monday, November 27, 2006
"$80B plus assuming $15B in debt is a very high price for a company that earned only $3B in 2005. Overpaying for BellSouth is the first fact Bernstein Research cites about AT&T. BellSouth earnings have been dropping for several years. Like most telcos, BellSouth retirement costs are probably understated and assets overstated. The key growth drivers - wireless and DSL - are approaching saturation over the next few years while landline losses continue. Both companies have seen profits enhanced by U.S. corporate tax cuts, but the enormous deficit makes further cuts unlikely. Video is a loss leader for the rest of the decade. When AT&T announced the BellSouth purchase, AT&T’s stock immediately fell."