Would AT&T (T) And Verizon (VZ) Follow GM (GM) And Off-Load Liabilities?

“AT&T Inc.(T), the biggest U.S. phone company, and No. 2 Verizon Communications Inc. (VZ) may follow General Motors Corp. (GM) in trying to shift retiree health-care liabilities to a union-run fund, a move that has helped boost GM’s shares 39 percent this year”. At least Bloomberg thinks so

International Union of Electronic Workers-Communication Workers of America  represents workers at AT&T, Verizon and Qwest Communication International Inc. in Denver, the second-, fourth- and 13th- largest companies ranked by retiree obligations in the S&P 500. The union will negotiate with Verizon and Qwest next year and AT&T in 2009, according to Bloomberg.

What could the move mean for telecom stocks? Based on the $3.5 billion Verizon spends each year on current and retired employee health costs, a great deal. GM’s stock got a 25% “healthcare fund settlement” benefit when it worked out its deal with the UAW.

That would translate into Verizon’s shares moving from their current $45 to over $56. Is that number based on exact calculations of health costs to balance sheet to share price? No. But it is probably in the ball park.

Douglas A. McIntyre