This Is What’s Routing AT&T (T) And Verizon (VZ) Margins: John Butler

The price wars AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) are waging and reacting to have pummeled both companies’ margins, John Butler reports on Bloomberg’s Bottom Line.

The comment about AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ), number one and number two carriers in the U.S. by subscriber base and two of the top 20 most valuable brands in the world, comes after Verizon revealed

“What they basically said was that margins were going to come down along with EPS, of course, in the fourth quarter and it’s really due to heightened competitive activity, which is code for a price war in telecoms right now,” Butler said.

According to the Bloomberg reporter, the “gloves have really come off” in the price wars between the major carriers in America. Sprint Corporation (NYSE:S) and T-Mobile US Inc (NYSE:TMUS) are the instigators of these price wars, he added.

Verizon Communications Inc. (NYSE:VZ) said in a statement on Monday that customer volume as well as promotional offers are expected to hit its wireless segment EBITDA, EBITDA service margin, consolidated EBITDA margin and earnings per share.

AT&T Inc. (NYSE:T) is also being hit by these pricing wars.

“AT&T is also affected in a similar manner although one thing they are seeing is net adds are going to be up on a sequential [and year-on-year] basis. Basically what they said is really how this is going to play out which is that it’s the holidays, it’s been a very promotional time in telecom,” Butler said.

Nonetheless, he said he expects these promotions from AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ) and their rivals will end sometime within the next year because they will have to generate more cash flow to invest in their networks.

AT&T Inc. (NYSE:T) includes Cliff Asness’ Aqr Capital Management reported owning 4.55 million shares by the end of the third quarter. Warren Buffett’s Berkshire Hathaway reported owning just over 15 million Verizon Communications Inc. (NYSE:VZ) shares by the end of the same period.