The telecom industry's two biggest mergers faced renewed scrutiny from Wall Street last week. With a federal judge studying the antitrust implications of AT&T's acquisition of BellSouth, some analysts are downgrading on fears that the merger could fail to win approval. "We do not view approval as a certainty," A.G. Edwards wrote in a research note last week as it downgraded its rating for BellSouth from "hold" to "sell." "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…[BellSouth's stock price] could drop significantly if the merger were not approved."
Meanwhile, the earnings warning from Lucent, which is predicting negative revenue growth this year, makes its mega merger with Alcatel less compelling. In a research note published last week, Credit Suisse analysts called the merger "less than compelling." The firm indicated it may soon lower its rating for both companies to adjust for risks in the merger.
To read more about renewed scrutiny surrounding the industry's mega mergers:
- check out this article from Telephony Magazine