Citi analyst lowers telecom services outlook

Michael Rollins said he now expects sectorwide revenue to grow 3 percent rather than 4 percent over the next four years.

Rollins said key areas of growth for telecommunications services companies, such as wireless and broadband, have reached maturity, while a weaker economy is weighing on other segments.

The analyst made several changes to his estimates on companies in the sector: He cut his earnings estimates on AT&T Inc., saying he expects margins to be weaker. He cut his price target to $37 from $39 and maintained his "Hold" rating.

In addition, Rollins said shares of Verizon Communications Inc. would outperform AT&T, predicting margin expansion and better performance from its high-speed Internet services. He rates Verizon "Buy."

Meanwhile, he downgraded shares of Level 3 Communications Inc. to "Sell" from "Hold," saying he prefers shares of TW Telecom Inc. and Equinix Inc.