AT&T May Write Down Consumer Business Assets

A potential writedown associated with AT&T's recently announced decision to shift its strategic focus away from consumer services to business markets, could total as much as nearly $44 billion, according to analysts.

The shift has resulted in a "trigger event" for the company that requires a review of AT&T's holdings in property, plants, and equipment that could be affected by the change, the company reported in Securities and Exchange Commission 10Q filing this week.

Attributing any specific writedown amount that could be forthcoming is premature, a spokesman for AT&T said, as the company has yet to determine that there will be any writedowns. "We just started the evaluation," the spokesman said. "If we determine it's necessary, we would take that charge in the third quarter. We're letting our shareholders know that this is a potential outcome."

AT&T announced the change of direction in reporting its second-quarter results last month, saying that "as a result of recent changes in regulatory policy governing local telephone service, [we] will no longer be competing for residential local and standalone long-distance customers."

Increased competition "by everyone under the sun" has made local service competition less attractive to AT&T, says Brian Washburn, an analyst at Current Analysis. The combination of consumer reluctance to change carriers, along with the advent of federal do-not-call legislation "has resulted in fewer and fewer returns" for the company, he says. "They've done the math and saw that it cost more to try to get the customer than they're actually able to get out them."

The move might also be an effort to pressure the SEC and Justice Department to rethink the regulatory changes, he adds. "To say what degree they might be bluffing is difficult," Washburn says. "But if you're as big as AT&T, with millions of customers, it's hard to say it's just a bluff."