AT&T Inc.'s shares tumbled Tuesday after Chairman and Chief Executive Randall Stephenson said the telecom carrier is experiencing some slowdown in its broadband and traditional wire phone sales to consumers.
Speaking at Citigroup Inc.'s Entertainment, Media and Telecom Conference in Phoenix, Stephenson said the bulk of the weakness is coming from service disconnections due to nonpayment on those lines.
AT&T's shares fell $1.87, or 4.6 percent, to close at $39.16, bouncing off an initial dive that sent the stock down 9.5 percent.
The slowing U.S. economy has not hurt the company's wireless business or its sales to large corporations or small- and medium-size businesses, Stephenson said.
The consumer broadband and wire-line business makes up less than 20 percent of revenue for AT&T, the nation's largest wireless carrier with 65.7 million subscribers.
AT&T did not change its guidance of double-digit earnings-per-share growth for 2007 and 2008. AT&T is scheduled to report fourth-quarter earnings Jan. 24.
On the whole, Stephenson said AT&T's business will continue to grow, driven by wireless strength, increasing broadband penetration and its premium television service, U-verse, which had a troubled early rollout. By year's end, AT&T expects to have more than 1 million subscribers to U-verse, an Internet Protocol-based service that sends cable TV through home phone lines.
"Wireless is proving to be fairly resilient, even in an economic downturn," Stephenson said.
He said traditional wire lines and home broadband services seem to be the first thing consumers disconnect when they are unable to pay their telecommunications bills; wireless is the last.
The wire-line phone business has been shrinking steadily for years as consumers switch to cable, wireless and other options.
AT&T's enterprise segment, the business that provides services to large corporations, has been a "pleasant surprise in the past few months," Stephenson said, adding that he expects the business to continue go grow throughout 2008.
Patrick Comack, an analyst for Zachary Investment Research, noted though that telecom sales to large corporations generally lag the economy by about six months, and they are far more likely to effect the company's bottom line so investors will continue to watch that segment.
For a giant like AT&T, wire phone line and broadband sales to consumers are less likely to effect overall earnings, he said.
"It's a very sensitive market, and let's face it, AT&T has been doing sensational. People may hear something negative and it may give them a reason to sell," Comack said of Tuesday's sell-off.
AT&T shares have traded between $33.20 and $42.97 in the past 52 weeks.
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AP Business Writer Barbara Ortutay in New York contributed to this report.