Details from a court filing by telecom giant AT&T showed that the company was poised to spend $4 billion to remove lead-coated cables it had laid in various parts of the country decades ago. AT&T stock rose more than 7 percent after analysts extrapolated data to arrive at the estimated amount for removing the cables.
Earlier, telecom stocks had fallen under the impact of a Wall Street Journal investigation that revealed that they left behind thousands of lead-coated cables in the ground. While AT&T shares have plunged to their lowest level since 1993, Verizon shares dropped 7.5 percent to their lowest closing level since 2010.
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Court Filing
According to analysts at Goldman Sachs and Morgan Stanley, the estimated cost of removing about 60,000 miles of cables would be in the range of $2 billion to $4 billion. “This illustrative calculation does not factor in time (i.e., it would likely take several years to complete a project of this scope) nor the potential to share these costs with other projects such as AT&T’s ongoing deployment of fiber,” the analysts wrote in a note, according to Yahoo Finance.
Separately, Morgan Stanley also assessed that the cost would be in the range of $4 billion. Morgan Stanley also relied on court filings from Pacific Bell Telephone Company, which is a subsidiary of AT&T. The company gave access to the filings in response to the Wall Street Journal’s report. “We are pleased to get further disclosures from the industry to help investors size the potential impact of this issue; recall that we estimate that AT&T represents half of the wireline network in the US … It appears that AT&T and others are taking issue with the WSJ testing methodology and it will be interesting to see what independent testing may find,” Morgan Stanley’s Flannery wrote.
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AT&T’s Response
In the filing, AT&T said the lead-coated cables formed less than 10 percent of its copper footprint. Earlier, AT&T also said that WSJ relied on “flawed” testing methodologies and that there was a “conflict of interest” in the process as well. “Any new scientific data needs to be studied further before arriving at conclusions about public health and safety related to these cables,” the company said.
The lead-coated cables were laid by the telecom companies as far back as in the mid-1800s and the process continued into the 1900s as the telecom giants were building the national telephone systems. The Wall Street Journal says in its report that the telecom companies were aware of the environmental hazards.
The report specifically claims that officials at AT&T had said in 2010 that the company was in the know of the issued posed by the tainted cables. At the time, the report says, the company believed it was riskier to try to extract the cables from the ground and water.
