AT&T Risks Hit to Reputation After Report of Data Spying for NSA

(Bloomberg) — AT&T Inc.s reputation may take a blow from reports suggesting the telecommunications company had a deeper level of involvement in U.S. government surveillance programs than had previously been disclosed, analysts said.

AT&T had a longstanding relationship with the National Security Agency that may have superseded those of competitors, the New York Times reported Saturday. Documents provided by former government contractor Edward Snowden that were reviewed jointly by the newspaper and investigative journalism group ProPublica described AT&Ts relationship as highly collaborative with the NSA.

Its no secret phone companies have been compelled by various agencies to turn over data as part of U.S. surveillance programs since the Sept. 11 attacks. Whats unusual in the fresh revelations is the extent to which AT&T may have shown, in the words of one document, an extreme willingness to help. That may give AT&T a temporary image knock without hurting its long- term business, analysts said.

They might get blow-back, Roger Entner, analyst at Recon Analytics LLC in Dedham, Massachusetts, said in a telephone interview. While he expects no effect on the companys stock price, this story is one of those triggers that will let them evaluate if they want to continue this program and what extent they want to continue.

AT&T follows the law in dealing with government requests, Fletcher Cook, a spokesman for the Dallas-based company, said in an e-mail. We do not provide information to any investigating authorities without a court order or other mandatory process other than if a persons life is in danger and time is of the essence, such as in a kidnapping, he wrote. Cook said the company didnt have anything else to add.

An e-mail and voice message left after business hours with the NSA werent immediately returned.

Reputation Risks

AT&T, the second-largest U.S. wireless carrier, has confronted a long decline in demand for landlines in the U.S. and price pressure in the wireless industry. To shore up its business, it completed a $48.5 billion takeover of DirecTV last month to become the nations No. 1 pay-TV company.

The Times reported that AT&T gave the spy agency access to billions of e-mails and installed surveillance equipment on at least 17 of its Internet hubs in the U.S. The company wasnt named in the documents, but its identity was apparent by other details such as dates and events mentioned in the documents.

In AT&Ts case, customer reaction might be muted because people assumed it was violating their privacy already and that they were in cahoots with the government, said Cindy Cohn, executive director of the San Francisco-based Electronic Frontier Foundation, a nonprofit group that describes itself as defending civil liberties in the digital world.

Their customers deserve to know what they are doing with their most private and intimate communications, said Cohn, whose group sued the NSA on behalf of AT&T customers in 2008.

Most prior disclosures of cooperation with the NSA by telecommunications companies didnt move shares of AT&T by more than a percentage point or two. The shares have gained 1.4 percent this year, closing Friday at $34.05.

Optically this doesnt look good for AT&T, said John Butler, senior telecom analyst at Bloomberg Intelligence. That said, I fail to see any material impact on its business coming from this.

To contact the reporter on this story: Brian Louis in Chicago at [email protected] To contact the editors responsible for this story: Kevin Miller at [email protected]; Nick Baker at [email protected] Bruce Rule


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