BellSouth Stock Downgraded on Reg Uncertainty


Regulatory uncertainty has take its toll on BellSouth.

Broker A.G. Edwards has downgraded BellSouth stock from "hold" to "buy," due to concerns over the network neutrality debate and a D.C. court merger review.

The potential risk of merger opposition and price deterioration no longer are balanced by the potential price appreciation from the successful completion of the merger with AT&T..." said the broker. "Our specific concerns include the intensity of the net neutrality debate in the U.S. Senate and the U.S District Court review of the SBC/AT&T and VZ/MCI mergers.”

Telephone companies have talked about getting a return on their network investment by charging more for bandwidth and security-intensive Internet applications like video, but network neutrality forces, backed by money and muscle, from the likes of Microsoft and Google could throw a wrench into those plans.

In addition, If the current antitrust court review of the relatively light regulatory touch applied to the mergers of SBC/AT&T and Verizon/MCI does not go well for the government, it could spell a tougher Justice Department review of AT&T/BellSouth.

A.G. Edwards says it is not convinced the merger will go through at all, or at least feels there is enough of an x factor to warrant the downgrade.