UPDATE 1-Baird raises AT&T, Verizon, 2 others to outperform
* Upgrades AT&T, Verizon, Leap, MetroPCS from neutral rating
* Ups AT&T price target to $34 from $30
* Raises Verizon target to $42 from $36
March 28 (Reuters) - Robert W. Baird raised AT&T Inc (T.N) to "outperform," saying it is confident that the No. 2 U.S. mobile carrier's $39 billion deal to buy T-Mobile USA will be approved by regulators and expects the hyper-competitive wireless environment to stabilize.
The world's largest M&A deal so far this year could run into trouble with U.S. antitrust officials who fear that fewer wireless players could drive up prices for consumers. [ID:nLDE72K03W]
The brokerage, which also raised three other wireless communication companies, including AT&T's biggest rival Verizon Communications Inc (VZ.N), said after the deal both AT&T and Verizon should benefit from one less competitor.
"Reducing the number of nationwide providers from four to three should improve pricing stability, which is all the more important in the face of surging data traffic," analyst William Power said in a note to clients.
The analyst also said Apple Inc's (AAPL.O) iPhone should speed up Verizon's postpay growth and expects the No. 1 U.S. wireless carrier to generate an industry high profit margin.
Verizon's February iPhone launch ended AT&T Inc's (T.N) three years of exclusive U.S. rights to sell the device. [ID:nN01135667]
The analyst also raised Leap Wireless International Inc (LEAP.O) and MetroPCS Communications Inc PCS.N. [ID:nWNAB0806]
Power added that AT&T's proposed acquisition could spur Verizon or Sprint Nextel (S.N) to pursue acquisitions of MetroPCS, Leap Wireless or US Cellular Corp (USM.N).
The analyst said earnings per share at the companies would be driven by higher average revenue per users, helped by strong data growth due to smartphone adoption and 4G networks.
(Reporting by Vaishnavi Bala in Bangalore; Editing by Maju Samuel)
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