AT&T Faces 2009 Growth Challenges on Wireline Weakness, Reiterating Hold

4/23 - "We believe wireline margins will continue to be soft relative to prior management guidance of 36%, with 1Q as a starting point of 34.1% and a revised forecast for FY08 at 34.8%, as we believe the headcount reductions and planned cost improvements for '08 may be offset by greater line loss and further marketing aggression on video."

"We believe wireless margin expansion remains intact, although the slowing postpaid growth and mix shift to prepaid and wholesale creates risk to the sustainability of top-line revenue growth. We believe wireless revenue growth will slow to 8% in' 09...Directory revenue fell nearly 2% in 1Q, and we believe economic pressures will weigh on revenue and margin performance throughout '08, leading to modest EPS dilution."

"We believe AT&T's earnings consensus will face another downward revision in '08 to $3.08 and grow just under 10...