U.S. telecom shares tumble after Verizon warning

Reuters
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(Reuters) - Shares in U.S. telecom stocks fell sharply on Tuesday on concerns of an industry price war after Verizon Communications <VZ.N> warned that promotions in its wireless business would bite into its fourth-quarter profit.

Shares in Verizon dropped 4 percent to $46.86, the lowest since early May, while AT&T <T.N> fell 3 percent and Sprint Corp <S.N> 4 percent. Smaller rival T-Mobile US <TMUS.N>, which announced an $870 million convertible preferred stock offering on Monday, lost 5.4 percent.

Verizon and AT&T, the biggest U.S. telecoms service providers, were two of the most actively traded issues on the New York Stock Exchange on Tuesday morning. The two stocks took 20 points off the Dow Jones Industrial Average <.DJI> between them.

The S&P telecom sector <.SPLRCL> was down 3.8 percent, its biggest percentage drop since Aug. 8, 2011, when it fell 5.4 percent.

"We have been wary of the carriers in general because of rising competition that we believe will pressure average revenue per user (ARPU), margins and returns over time," said New Street Research analyst Jonathan Chaplin.

(Reporting By Sinead Carew; Editing by Alan Crosby)

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