An East Coast buy-side analyst and a sell-side analyst say the bonds of AT&T and Sprint Corp. are going to recover over the next few months as they take market share away from Qwest Communications and WorldCom. Marion Boucher Soper, head of investment-grade research at Deutsche Bank, says Sprint's bonds will trade up two to three points once the sale of its directory business goes through, as she believes it will. She also argues that AT&T's bonds will climb three to five points as the market becomes more comfortable with its debt profile and ability to compete in long distance.
The Sprint 8.375% notes of '12 were bid at 73 last Wednesday morning, while AT&T's 7.30% notes of '11 were bid at 86.5.
The buy-side analyst says he has recommended both companies' bonds to his portfolio manager. He believes Sprint's directory sale will go through because its management team has a history of delivering on its promises.
One West Coast portfolio manager is not convinced that Sprint and AT&T are ready for a rebound. He is concerned that Qwest and WorldCom will continue to present a formidable competitive challenge once the long distance carriers emerge from restructuring with a reduced debt load.