AT&T to pay $6.25M to SEC over alleged leaks about smartphone business

AT&T agreed to pay $6.25 million to settle a Securities and Exchange Commission (SEC) lawsuit accusing the company of selectively leaking details about its smartphone business, Reuters reported over the weekend.

Three executives of the company – Christopher Womack, Kent Evans and Michael Black – who were accused of violating fair disclosure requirements also agreed to each pay a $25,000 penalty, according to the report.

Neither the company nor the individuals admitted or denied wrongdoing. All three individuals remain employed at AT&T, according to their LinkedIn profiles.

“We are committed to following all applicable laws and pleased to have resolution with the SEC,” AT&T said in a statement provided to Fierce. “With this settlement, the company and its employees neither admitted nor denied the SEC’s allegations.”

SEC rules prohibit the disclosure of material information to securities analysts without disclosing that information to the public. One of the purposes of the regulation is to prohibit companies from selectively providing non-public guidance to analysts regarding earnings forecasts, according to the agency.

Smartphones sales in 2015-2016

The SEC’s allegations revolved around information that Wall Street analyst firms were given about revenue estimates for the first quarter of 2016, which ended up in AT&T beating a consensus forecast when it announced earnings on April 26, 2016.

The agency alleged the three individuals in the Investor Relations department made phone calls to about 20 analyst firms in order to achieve that result.

AT&T reported a record-low equipment upgrade rate of 5% for the first quarter of 2016, according to the SEC’s complaint.

The SEC’s complaint traced the company’s reduction in wireless equipment revenue to a series of factors that started in 2015. One of the changes was the business model by which it sold phones, eliminating subsidies and charging customers the full price for phones, payable over installments. That resulted in customers holding onto their phones longer and doing fewer upgrades.

Other factors included more BYOD, as well as one manufacturer’s smartphone offering fewer improvements over the previous version, which meant that 2015 was a unique year in that there was no “iconic” handset driving people to buy new phones.