Risk & Compliance

AT&T Charged With Improper Calls to Analysts

The SEC says three IR executives selectively disclosed market-moving information to analysts to avert a third straight quarterly earnings miss.
Matthew HellerMarch 8, 2021

Three AT&T investor relations executives have been charged with sharing nonpublic information with analysts to get them to lower their revenue forecasts so the company would avoid a third straight quarterly earnings miss.

The U.S. Securities and Exchange Commission said AT&T violated Regulation FD, which prohibits selective disclosure of market-moving information, and IR executives Christopher Womack, Michael Black. and Kent Evans aided and abetted the company.

The violations occurred before AT&T released results for the first quarter of 2016, the SEC said in a civil complaint, and were intended to induce each of about 20 analyst firms to “lower its revenue estimate sufficiently to bring the resulting consensus estimate down to the level that AT&T expected to report.”

After the average estimate fell $323 million in three weeks, AT&T reported $40.54 billion in revenue, beating the lowered target by $76 million and averting a third consecutive miss.

“AT&T’s alleged selective disclosure of material information in private phone calls with analysts is precisely the type of conduct Regulation FD was designed to prevent,” Richard Best, director of the SEC’s New York Regional Office, said in a news release.

According to the commission, Womack, Black, and Evans learned in early March 2016 that AT&T’s smartphone sales for the first quarter would decline more than expected, reflecting a record low “equipment upgrade rate.” As a result, gross revenue was expected to fall more than $1 billion below the consensus estimate.

The investor relations department “developed a plan to contact individual analyst firms whose estimates were higher than AT&T’s projections,” the SEC said, with the calls starting March 9 and ending April 21.

At one point, CFO John Stephens allegedly stopped by the office of the investor relations director to “make sure that his team was ‘working the analysts that still have equipment revenue too high.’”

AT&T said in a statement that the allegations were meritless and that “unfortunately, this case will only create a climate of uncertainty among public companies and the analysts who cover them.”

Stephens is due to retire this month after 28 years with AT&T.