ML: Q3 reports could be messy

As third-quarter earnings season approaches, expectations for telecom services firms’ quarterly reports are “as low as they have been for a while,” Merrill Lynch said in a report issued today.

The effects of Hurricane Katrina, along with mid-quarter merger closings at Sprint Nextel and Alltel (which acquired Western Wireless), could make third quarter reports “messy,” ML said.

Last week the financial firm lowered its estimates for Verizon Communications to $2.40 per share, 7% below analysts’ consensus of $2.59. And it is reducing estimates for Alltel’s net subscriber additions from 117,000 to 55,000, due to the distraction of technology migrations and weakness in the prepaid market.

ML also expressed low expectations for rural carriers such as Valor, citing pressure from cable telephony.

However, ML also predicted Verizon Wireless could set a new record in net adds for the third quarter. ML expects Verizon Wireless to report 1.95 million net subscriber additions for the third quarter, up from about 1.92 million in the second quarter. It expects Cingular Wireless and T-Mobile USA to post sequential declines in net adds.