The deteriorating economy has US telecom stalwarts AT&T and Verizon looking at a much-tougher-than-expected 2009, with reduced growth in all segments, including fewer wireless net adds and weakness in enterprise sales, two areas that had been growing solidly, according to influential Bernstein Research analyst Craig Moffett.

In a reconsideration of the telecom sector released this morning, Moffett detailed a “bottom-up reassessment” of his 2009 forecasts, resulting in “sharply cut” expectations for the new year. While not a surprise given current economic conditions, they follow relatively strong stretches for both companies, making it necessary to temper expectations AT&T and Verizon could withstand tough times and represent a defensive stock play. “We believe the telco stocks have come too far, too fast,” Moffett wrote.

Overall, Bernstein projects revenue growth in core areas (wireless, enterprise and wireline) to be just over 1% for AT&T and 2% for Verizon in 2009. Correspondingly, it revised its share target price for Verizon from $32 to $27, changing its rating from market perform to underperform. AT&T’s target price was cut from $35 to $27, with its rating changed from outperform to market perform.

Moffett said the primary risk comes from sectors that have been strong in recent quarters. Wireless, already running the risk of saturation, can be expected to slow sharply. The research house shaved wireless subscriber net additions by 1 million for each company for 2009, from 4.2 million to 3.0 million for Verizon and from 4.5 million to 3.5 million for AT&T. Enterprise opportunities could also be hit, with Bernstein cutting revenue estimates to -3.3% for both AT&T and Verizon.

“In today's tumultuous market environment, there is an almost primal urge to find ‘safe’ investments. AT&T and Verizon have strongly benefited from this impulse. Because of the perceived stability of their businesses, solid balance sheets, attractive dividend yields and blue-chip histories, both stocks have outperformed the market significantly [in 2008],” Moffett wrote, noting that AT&T’s stock was up 25% and Verizon’s up 29% in relative terms in the fourth quarter, at a time when the S&P 500 fell 22%.