It is no secret that all of the big national U.S. carriers are carrying loads of debt; and have been since the Telecom Act of 1996.  You cannot blame the Act for the debt but you certainly understand the environment the Act created.  Telecom carriers up until that point all technology deployments were internally funded.  Up until the Telecom Act of 1996, telecommunications carriers were considered utility stocks.  Frankly to keep the stock stable, investors need to go back to treating them that way again.  Unlike other infrastructure businesses, telecom has a dynamic technology attribute, hence the speculative nature of telecom.  This has got to stop now.  Unrealistic expectations for carriers have caused their stocks to jump up and down like jumping beans.

The Act enabled carriers like Verizon and SBC to go on massive spending sprees – so much more public money was available and Wall Street set unreasonable expectations on these carriers that capital spending and acquisition spending became the norm and important to maintain favorable Wall Street outlooks.  Speculation is at times a blessing but more often a curse.

Since the passing of the Telecom Act of 1996, the telecom community has gone from carrying minimal debt to carrying debt loads so high that some companies’ debt loads approached 60% of the company’s equity value.  Given the high flying investing sprees between 1996 and 2001, it is no wonder that telecom companies went into debt.  Just prior to the meltdown of 2001, there were dozens of telecom companies that were carrying so much debt their debt was higher than their total asset value.  Forget about corporate market valuation, back then Wall Street analysts were establishing valuations based on cap ex spending not revenue.  There was a disconnect between revenue generation and value.  Talk about insanity.

AT&T’s and Verizon’s numbers have not been a secret to anyone in restructuring.  My position now as it was then Verizon and AT&T are utilities, its time to start treating them that way.  As for their inability to meet dividend and capital spending needs, first, both companies can reduce dividends and next both companies can cut capital spending and should cut capital spending now.

Spending cuts should be drastic and targeted.  Modest reductions spare the vendors on the short term but eventually will kill the carrier.  Spending cuts need to be targeted and deep.  There will be casualties.

Sprint is in the deepest trouble but out of all the Big 3 Carrier CEOs only Dan Hesse has had recent experience in hard core restructuring.  Given the fact that Sprint is such a large carrier and the company’s importance to the nation’s national security, I doubt the federal government will allow the banks to push Sprint into bankruptcy.  Telecom has a national security aspect.  Given this economic environment, I doubt Hesse will be able to sell Nextel easily.  My suggestion to Wall Street is let Hesse do his job.

Seidenberg is a smart guy.  Stephenson is a smart guy.  Let them do their jobs to manage their companies.  Stop telling them how to run their businesses.  All three gentlemen are old telephone guys.  I would trust them.

Seidenberg, Stephenson, and Hesse will need to make tough decisions and some vendors will suffer because of those decisions.  Unfortunately, that is the way the cookie crumbles.

The carriers need to focus on conserving as much cash as possible.