AT&T to Return Overbilled Taxes to Customers
AT&T (NYSE:T), which primarily competes with other mobile carriers like Sprint (NYSE:S) and Verizon (NYSE:VZ), is facing a $1 billion settlement for a mobile data charges lawsuit. The natural questions that arise are what are the financial risks and should investors be concerned?
A recent article by FierceWireless states,
AT&T Mobility will have to work with state and local governments to pay back nearly $1 billion as part of a class-action settlement stemming from allegations that the carrier improperly levied taxes against customers on mobile Internet access fees, according to attorneys for the plaintiffs in the case. [1]
The key point to note is that AT&T is facing an issue over charging improper taxes that was passed on to taxing authorities. Therefore the company will look for tax refunds from these authorities and return them to customers. It seems like it may not owe anything from its own pocket making the financial risk minimal.
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The main concern AT&T faces is how will customers react? Could there be a lost of trust or is this mistake forgiveable? Let us know what you think in the comment box below.
Our price estimate for AT&T $38, implying a 25% premium to the market price.
See our complete analysis for AT&T
Notes:- AT&T faces $1B settlement in mobile Internet access fee lawsuit, FierceWireless, Jun 7 2011 [↩]