Telecommunications companies will face intensifying competition and pressure on prices next year, according to separate reports Thursday from Barclays Capital and Deutsche Bank.
In a note to investors initiating coverage of the sector, Barclays analyst James Ratcliffe said most companies in the industry "are reasonably stable." But he added that competition is leading to falling prices and a battle to bring out new features that stand out to consumers.
Most of his stock picks for the sector are wireless tower operators: American Tower Corp., Crown Castle International Corp. and SBA Communications Corp., which he rates "Overweight."
He said that while rising competition may hurt carriers, the trend benefits tower operators by driving demand for more locations.
American Tower was up 37 cents to $41.95 in afternoon trading, while Crown Castle rose 86 cents, or 2.4 percent, to $37.53, and SBA Communications rose 26 cents to $33.77.
Deutsche Bank's Brett Feldman also took a positive view on tower stocks, initiating coverage of the three with a "Buy" rating.
Feldman's top "Buy" ratings also include carriers Verizon Communications Inc. and tw telecom inc.
He said Verizon has the most flexibility to withstand a fall in average revenue per customer by cutting costs.
Tw telecom should see revenue pick up as the economy improves because of its large corporate customers and its decision to maintain growth with capital spending through the recession, Feldman said.
Verizon inched up 6 cents to $32.77, while tw telecom fell 25 cents, or 1.5 percent, to $16.49.