By Maxine Shapiro, KERA 90.1 commentator.
Dallas, TX – With earning woes continuing in the Telecom Industry, the question on everyone's mind is when will the Telecom Industry sees brighter days? I'm Maxine Shapiro with KERA Marketplace Middays.
Reported yesterday on the Dallas Business Journal website, Dallas-based Allegiance Telecom Incorporated announced a wider-than-expected loss in its fourth quarter. We've all but memorized the lyrics to this song. Then today's Wall Street Journal reports that Sprint, the third-largest long-distance carrier, is having a hard time finding access to commercial paper. Commercial paper is an unsecured, short-term loan that's usually issued at a discount of current market interest rates. So I asked Richard Piotroski, Vice President and Senior Analyst at SWS Securities, "What seems to be the trouble?" Piotroski pointed out that capital markets, where bonds are traded and money is lent to corporations via these bonds, have been closed to most industries, and especially the telecom industry, since early 2000.
I decided to look at the chart for Sprint. In January 2000, Sprint was trading at over seventy dollars. Today, they're in the low teens. The excuse being given for these doors shutting: debt. We know the lyrics to this song, too. I questioned Piotroski again. "Has the debt really changed that much?" He believes that the debt might have grown a little but has pretty much stayed steady.
So, it's all about perception. As the Journal put it, investors just have a "general nervousness about Sprint, rather than specific concerns such as aggressive accounting." Unquote. Therefore, commercial paper has tightened. Sprint officials are baffled why they're being penalized - for a change in attitude. I'm telling you, we're one step away from witch-hunt mode.
Piotrosky does feel that as new innovations enter the wireless market, profits will grow and trickle up to the parent companies. For Sprint, he predicts it won't be until the second half of year. In the meantime, the telecomm industry will have to wait for perceptions to change. Let's hope it's soon. For KERA Marketplace Middays, I'm Maxine Shapiro.
Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 PM.