AT&T Inc., the largest U.S. phone company, said in a filing Thursday that it lowered its expected long-term rate of return on its $45.9 billion pension plan to 7.75%, citing “continued uncertainty” for the stock market and the U.S. economy.
Dallas-based AT&T also reduced its assumed discount rate to 4.3% as of Dec. 31, resulting in an actuarial loss of about $12 billion, it said. That was offset in part by about $1.9 billion in assets gains and $100 million from other gains and actuarial assumptions.
As a result of the change, the company recorded a $10 billion fourth-quarter charge.
“The company has deep pension problems, they are not funding the pension enough,” Laurence Balter, chief investment strategist at Oracle Investment Research, in Fox Island, Wash., said in an interview. “It's possible investors are just becoming aware of it. They spend a lot of money on building out, on competing against Verizon, and they need to focus on the balance sheet.”
Shares dropped 1.8% to $32.60 in extended trading in New York, after declining less than 1% to $33.20 at the close Thursday. AT&T's stock rose 11% last year.
AT&T is slated to report its full-year earnings on Jan. 24.