Wringing the Bell

In a courtlike Washington chamber last week, there began a hearing that very directly affects the fortunes of the world's biggest corporation and 2,840,500 investors. The Government's long-awaited investigation of the American Telephone & Telegraph Co. was under way. For perhaps the next two years, the seven-member Federal Communications Commission will hear hundreds of witnesses and weigh tons of documents to determine what should be reasonable rates and profits for a company that is really a tolerated monopoly. Last week Bell got in first licks. Far from earning an excessive profit, argued Vice President F. Mark Garlinghouse, A.T. & T. in 1965 earned a modest 7.78% on investment as against 10% to 12% for most big industrial firms. He contended that the telephone company really needs 8% to 8.5% to attract fresh capital and "treat our present investors fairly."

The FCC has insisted that it is "not trying to get A.T. & T.," but the investigation is giving investors quite a wringing. Since the commission announced its probe last Oct. 27, A.T. & T. stock has plunged from 66 7/8 to last week's 1966 low of 52 1/8, closed the week at 54. The sellers have been mostly big institutions, but the company fears that the investigation could begin to frighten off small investors as well. Already the paper loss on the stock has grown to a staggering $6.82 billion, more than double the gross national product of Ireland, and has cost each 100-share stockholder $1,288. This has been a primary factor in the recent drop in the stock market, and nobody on Wall Street doubts that the FCC investigation is the cause of Bell's decline. Had A.T. & T. held its October price, the Dow-Jones average of 30 industrial stocks would have been about 5.7 points higher than last week's close of 891.75.

To represent the shareholders, a group headed by Manhattan Lawyer Benjamin Javits, 71, brother and former partner of U.S. Senator Jacob Javits, last week ran large ads in major newspapers, soliciting investors to send in 100 for each share of A.T. & T. that they own in order to create a war chest. Javits wants to induce the FCC to scrub its investigation in favor of a friendlier "roundtable conference," contends that the company is entitled to at least 8% on its investment. His slogan: "Owners of the world, unite!"

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