Business Dials Down at Phone Companies

The outlook is worse in the wireline segment, as more consumers are expected to switch to cable service providers' "bundled" packages of video, Internet and phone.

Housing foreclosures and job cuts may accelerate the trend of people disconnecting their home phones.

Consumer wireline accounts for around a quarter of revenue at AT&T and Verizon. With each wireline cancellation, these companies also lose an opportunity to sell higher-margin services like high-speed Internet and video.

Bear Stearns' McCormack forecast a 5.2 percent fall in residential primary line losses at AT&T, and an 8.3 percent fall at Verizon. Sanford Bernstein analyst Craig Moffett said he thought the situation was worse for Verizon than for AT&T, but wireline losses are likely to hurt both in the long run.

Janco's Jaegers said Denver-based Qwest Communications International Inc may be particularly vulnerable since it operates in areas with high foreclosure rates. She sees Qwest's residential line losses increasing to around 10 percent.

Increasing bankruptcies and slower economic activity could hit corporate customers too, analysts said.

"There's going to be a lot of focus on the enterprise telecom business. A lot of people are waiting for that piece to be impacted by the economy," said Bear Stearns' McCormack.

(Editing by Gerald E. McCormick)

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