AT&T, Verizon facing 2009 slowdown

“To be sure, their businesses are more recession-resistant than most,” Moffett said. “But they will not emerge unscathed.”

Additional details worth noting:

• Wireless penetration is at about 85% today and is unlikely to move above 90% in the next two years, representing a flattening following more than a decade of strong growth.

• Overall saturation and pressure to reduce prices in the wireless sector will hurt ARPUs (average revenue per user); Bernstein expects overall wireless ARPU to be flat at AT&T and at 1% for Verizon.

• Wireless subsidies, led by AT&T’s iPhone deal with Apple, are rising, depressing wireless margins. The iPhone’s aggressive $199 price point – with heavy subsidy of about $375 – has become the benchmark for all smartphones to beat in 2009.

• Traditionally, telcos have been relatively “recession-proof” thanks to resilience of their core voice/wireline business. That is no longer the case, Bernstein says. The ubiquity of cheaper wireline replacements (including wireless and cable VoIP offerings) means “having a landline telephone from the local phone company may now be thought of as a discretionary purchase.” And since most consumers today already have a cell phone, eliminating a wired phone line does not result in a wireless add.

• Overall, Bernstein foresees revenue declines in enterprise for both companies in 2009 and 2010, with revenue growth returning to positive territory in 2011.