A pedestrian walks in front of an AT&T location in New York.
Scott Mlyn | CNBC
The Securities and Exchange Commission has accused AT&T and three of its executives of selectively giving Wall Street analysts access to non-public information without distributing it widely.
The SEC said in a new complaint on Friday that in March 2016, AT&T learned that its revenue would not meet analysts’ estimates due to a larger-than-expected decline in first-quarter smartphone sales. To avoid appearing to fall far short of expectations, the SEC said, AT&T Investor Relations executives Christopher Womack, Michael Black and Kent Evans called analysts to about 20 companies that disclose domestic sales data and how it would impact revenue.
AT&T shares were slightly negative in trading after Friday.
The SEC argued that the internal documents made it clear that the data were generally considered important to investors and could not be selectively disclosed under the Fair Disclosure Regulation (FD Regulation). This regulation says that material information must be shared publicly when it is shared with certain market professionals and analysts in order to promote a level playing field.
As a result of these calls, the SEC said, analysts have lowered their revenue estimates. This meant that the consensus estimate was just below the AT&T number finally reported for that quarter, according to the complaint.
According to the complaint, AT&T was to fall by more than $ 1 billion below the consensus revenue estimate for the quarter prior to executive calls. The complaint alleges that AT&T’s chief financial officer instructed the company’s investor relations department to “work” with analysts who had “too high” equipment estimates.
The SEC claimed that Black distorted the information about private calls with analysts as available to the public. The complaint alleges that “Black knew or recklessly disregarded the information he provided to analysts because he sought to calculate AT & T’s consensus estimates – none of which matched the information he provided in calls to AT&T. analysts ”.
In a lengthy statement following the complaint, AT&T said the process “is a significant violation of the SEC’s long-term FD policy and is inconsistent with the testimony of all those who participated in these talks.”
The company went on to say that the information discussed in the calls with analysts “referred to the phasing out of subsidy programs for the purchase of new smartphones and the impact of this trend on smartphone discount rates and equipment revenue. without subsidies for devices, customers have updated their smartphones less often, leading to a reduction in equipment revenue. “
AT&T also said it has already stated publicly that the decline in phone sales has not had a significant impact on earnings.
“The SEC’s pursuit of this issue will not protect investors and, in turn, will only serve to cool productive communications between companies and analysts, which the SEC was concerned about when it adopted the FD Regulation some 20 years ago,” he said. stated AT&T in the statement. “Unfortunately, this case will only create a climate of uncertainty among public companies and the analysts who cover them.”
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