Verizon, AT&T slip after UBS downgrades on economy

John C. Hodulik reduced his ratings on the companies to "Neutral" from "Buy" and said the economic slowdown is beginning to weigh on wireline results.

"Meanwhile, we expect the wireless segment to get more competitive as operators look to defend their turfs with the launch of the 3G iPhone next month," the analyst wrote in a note to investors.

AT&T, the exclusive U.S. carrier for Apple Inc.'s iPhone, said last Monday its profit will be hurt over the next two years as it subsidizes the new low price of the latest version of the gadget. The new iPhone goes on sale July 11 at prices starting at $199.

Additionally, Hodulik said last week's preannouncement of poor second-quarter results by Qwest Communications International Inc. "will come to be seen as the first sign of increased economic and competitive pressure on the sector."

Furthermore, Hodulik said he remains concerned about the slowdown in wireless subscriber growth.

"While pricing has been relatively rational in the marketplace, we believe AT&T's substantial subsidy on the 3G iPhone takes the competitive environment to a new level," he wrote.

As a result, he expects all the national carriers to get more aggressive in their attempts to keep their share of the lucrative postpaid subscriber market in the second half of the year.

Shares of San Antonio-based AT&T slid 78 cents, or 2.1 percent, to $35.90 in midday trading. In the past 52 weeks, the stock has traded between $32.95 and $42.97.

Shares of New York-based Verizon fell $1.18, or 3.2 percent, to $36.15. The stock has traded between $32.99 and $46.02 in the past year.