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Analysts make their calls on phone stocks

Steve Halpern regularly reviews more than 400 stock market newsletters and services, choosing what he believes to be the most interesting or informed recommendations. Investors should do their own research before buying or selling a stock. Halpern is editor of the Dick Davis Digest. For subscription information or further details, call (800) 654-1514.

Phone-company stocks were once considered as conservative and stodgy as other utility issues. Thanks to changing technology and the communications revolution, however, telephone companies are now seeing rapid growth. Below are some of Wall Street's favorite telecommunications plays:

U.S. Cellular

Headquarters: Chicago

Amex (Symbol: USM)

52-week range: $22.37{ _ $35.37{

Friday's close: $33

"U.S. Cellular _ the nation's seventh-largest cellular phone company _ has the potential to be one of the top carriers in the industry. The firm has interests in cellular systems in 208 markets across the country, almost all in small rural areas where there's no more than one competing cellular firm.

"Moreover, U.S. Cellular's strength in rural areas likely won't be challenged soon. That's because the two strongest competitors of cellular technology _ mobile radio and personal communications services _ are practical only in urban markets and not U.S. Cellular's rural strongholds. Revenues for the first half of 1994 were up 55 percent, while the firm increased its customer base 61 percent. Buy."

Market Leaders Report,

Laguna Hills, Calif.

AT&T

Headquarters: New York

NYSE (Symbol: T)

52-week range: $49.50 _ $58.37{

Friday's close: $54.87{

"AT&T is truly a premier company, and with the addition of McCaw Cellular, it will be a great long-term investment. With the McCaw merger, the stock's appreciation potential over the next three to five years is quite exciting. It will put AT&T in the forefront of a rapidly growing industry. The combined entity's earnings growth is likely to accelerate and cause AT&T's shares to trade at a higher multiple. Indeed, profits should continue rising in coming years as the voice, data and video transmission businesses merge. We'll keep our stop loss at 44 and buy the stock on any dips."

Jeff Helleberg,

The Marketarian Letter,

Grand Island, Neb.

Bell South

Headquarters: Atlanta

NYSE (Symbol: BLS)

52-week range: $51.25 _ $63.50{

Friday's close: $52.87{

"BellSouth is the largest of the so-called Baby Bells, with more than 19-million phone lines in nine Southeastern states. . . . We believe that the dynamics of BellSouth's business look strong for several reasons. First, the regulatory outlook appears more favorable than expected, with BellSouth having received rate-of-return improvements from several public utility commissions.

"Second, marketing and sales are being restructured so that they align vertically by business sector. Third, the company is striving to seek a balance between cost reduction and employee loyalty. Fourth, international operations are advancing ahead of schedule. And fifth, domestic investments are being focused primarily on BellSouth's core geographic and business competencies.

"We reiterate our buy rating; our one-year price target is 72."

Charles Schelke,

Smith Barney

Comcast UK Cable

OTC (Symbol: CMCAF)

Headquarters: Bermuda

52-week range: $15.50 _ $20.62{

Friday's close: $19.50

"Comcast UK is one of the five largest cable TV operators in Great Britain. Nearly two-thirds of Comcast's customers also receive telephone service through the company. Because phone service carries higher monthly fees than cable, Comcast has been able to roughly double its profitability by offering both cable and phone service.

"Moreover, the British government just mandated that any customer who switches from British Telecom to a cable phone company must be able to keep the same phone number, making it much easier for Comcast to penetrate the phone market. The firm's cash flow and private market value should grow very rapidly, and the stock could trade in the upper 20s within 12 to 18 months."

Charles Ganz,

Ganz Capital Management

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