Kaufman Bros. analyst Vik Grover initiated coverage of the Fortune 10 company and No. 1 local phone company with a “sell” rating. In his report, Grover speaks of the problems in the broader RBOC business: “We foresee multiple pressure points on RBOCs’ businesses that bode poorly for long-term value creation, including: (1) mounting line losses; (2) revenue deflation; (3) worsening bad debt; (4) worsening credit ratings; (5) debt maturity problems; (6) weak enterprise strategies; (7) government mandated market share losses; (8) cable MSO incursion; (9) wireless migration and substitution; (10) pricing pressure, cannibalization of product lines; (11) outdated networks and a migration to packet-switched architectures, arbitrage products that are evaporating; and (12) looming antitrust issues.”
He added: “Verizon is arguably the best positioned RBOC relative to these secular trends [but] we believe these trends are damaging and [Verizon] shares appear to be priced optimistically and without regard to these secular trends.”
If Verizon is the best of the RBOCs financially, what does this say about the rest of them?
