BellSouth Stock Downgraded on Reg Uncertainty

Publish date:
Updated on

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.