GIMME CREDIT

A sure sign of economic recovery is a gain in Standard & Poor's Telecom Services index. The sector was up 6% as of the end of August, coming in well ahead of the broader market. As a group, wireline telcos were up 7.9% in July and August. Dig deeper into the numbers, though, and it's clear that the rising tide of recovery is not lifting all telecom boats. When S&P issued its quarterly report card on the U.S. telecom and cable industries, the rating firm noted that in the second quarter the sector had three credit downgrades, including AT&T moving to junk status and Citizens Communications to speculative-grade. It wasn't too long ago that AT&T was considered to be among the safest and most stable investments. More recently, S&P is casting a wary eye on decisions by SBC Communications and BellSouth to issue more debt to fund the acquisition of AT&T Wireless via their Cingular Wireless joint venture. So do equity investors know something the watchers of debt don't? Hardly. With its ratings system geared to long-term concerns rather than individual stock buyers, who can still flit in and out of shares, S&P provides perhaps a more accurate barometer of how different companies are faring in the current environment. Based on the most recent fluctuations, it would appear that while telecom may indeed have hit bottom, the industry is far from back on stable footing.