AT&T Profit May Suffer As Consumers Tighten Belts

AT&T is expected to show an accelerated drop-off in landlines and weakness in its wireless business when it reports second-quarter earnings Wednesday, offering Wall Street an idea of how much the economic slump has affected the telephone business. Many analysts and investors also expect the largest US phone company to take a cautious tone and lower earnings guidance for 2008 as a whole. Over the past month, AT&T shares have fallen about 10%, a steeper percentage decline than suffered by the broader stock market and rivals Verizon and Qwest, reflecting investor jitters about the results. The company declined to comment. Phone companies used to be largely insulated from economic downturns because most consumers considered their home phone service a necessity. But 80% of Americans now own cellphones, making it easier for them to ditch their landlines. Others are dropping their landlines for cheaper services offered by cable operators.