Once considered a safe haven for shareholders, US telcos AT&T and Verizon are likely to suffer during this economic downturn as credit becomes harder to get and customers tighten their belts.

Craig Moffett, an analyst at Sanford Bernstein, has cut his earnings estimates for AT&T and Verizon, saying that scarce capital and higher costs to borrow money will mean lower earnings. Although the values of both companies will make slight gains this  year, Moffett said both companies would be hurt by lower customer spending. Businesses and consumers will continue to drop their home telephone lines in favour of using their mobiles.

Moffit said that it is getting expensive for traditional telcos to get customers. Verizon will have more problems because it will face higher borrowing costs related to its acquisition of Alltel.

He said that AT&T and Verizon still remain strong and stable bets for shareholders, but will suffer like anyone else. Moffit said that Sprint Nextel could be in serious trouble. Tighter credit markets are not likely to help it, either, as it struggles to find a buyer for its Iden network. X

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