Markets & Finance

Merrill Cuts SBC Communications to 'Sell'

Merrill Lynch downgraded SBC Communications (SBC) to sell from neutral.

Analyst Adam Quinton says from SBC's 2003 low of $18.85, the long-distance carrier's stock price has advanced by 46%. However, he says SBC sees pressure on margins in its wireline business, and should do so through 2004.

Quinton thinks growth prospects at SBC and other regional bells remain challenged by secular factors, namely high levels of competition and growing substitution trends. He sees limited scope for favorable regulatory changes in 2004, and expects the telecom debate to focus increasingly on how technology changes, such as voice over Internet Protocol, will destabilize the legacy voice business in the long term.

Quinton sees $1.56 2003 earnings per share, and $1.46 in 2004.

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