The escalating financial crisis has hit some companies in the capital-intensive telecommunications business, and is likely to favor the biggest, most stable players over the long term, an analyst said Thursday.
"The riskiest of the telco bets, and in particular the ones that are most dependent on financing, have taken the biggest hit," said Craig Moffett at Sanford Bernstein.
Sprint Nextel Corp., which has been on shaky footing for a while, has lost nearly a third of its stock value in the last two weeks. Regional wireless carriers MetroPCS Communications Inc. and Leap Wireless International Inc. are both down about 14 percent in the last week.
For Sprint, the trouble is double, Moffett said, because not only will it have a hard time raising cash for operations, but the prospect of selling off its Nextel business looks more distant, since it would be hard for a buyer to raise financing.
"We have been hit harder than some other telecom companies over the past week or so because our credit profile is not as strong," Sprint Chief Executive Dan Hesse acknowledged Thursday at a Goldman Sachs analyst conference.
Hesse played down the need to sell the Nextel business, saying "it's a very valuable business."
The largest phone companies, AT&T Inc. and Verizon Communications Inc., haven't been immune to the turmoil, but Moffett believes they'll grab market share.
"In general, in economic hard times, you tend to get increasing concentration with the strongest players," Moffett said. "They have the flexibility to invest in advertising and networks."
Verizon's chief operating officer, Denny Strigl, speaking at the analyst conference, emphasized the company's confidence in its cash flow.
"We feel we're well positioned," he said.
A spokesman for AT&T said the company had no fresh comment on its financial position.