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Verizon shares fall after Citi downgrades the stock, predicting lower wireless pricing ahead

A customer stands by a counter inside a Verizon Wireless dealer in Washington, D.C.

Andrew Harrer Bloomberg | Getty Images

Stocks in Verizon fell on Monday after a downgrade from Citi with reference to potential lower wireless pricing in the future.

Citi downgraded its inventory to neutral from purchase and maintained its $ 62 target. Verizon shares fell more than 1% in the market for trading on the market Monday.

"Verizon's consistently strong wireless performance performance may not be enough to drive further expansion at a time when investors are more likely to question the competitive environment and the long-term pricing and margin risks," Citi wrote. 39; s Michael Rollins in a note to customers.

The wireless carrier room is narrowed with a potential fusion between T-Mobile and Sprint on the horizon. As new competitors enter the room without inheritance pricing and with different marginal goals, the opportunities for expanding the margins are shrinking for Verizon, Rollins said.

A merger between T-Mobile and Sprint "creates a potentially disruptive fourth competitor [that] could be dilution at long-term prices and margins for the wireless industry," Rollins said.

Rollins said Verizon, the second largest US wireless operator, should consider and is well-equipped to buy DISH, which "keeps a disturbing amount of spectrum that can be used to build a scale network."

Verizon is in danger because the development of technology in the wireless carrier reduces costs, lowering the barrier to entering the category, Rollins said.

Despite the downgrade, Citi said it was not worried about Verinson's upcoming quarterly results.

Stocks in Verizon are only up 3% since the turn of the year T-Mobile, Sprint and AT&T are all about 20% year to date.

– With reporting from CNBCs Michael Bloom

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