SG Cowen downgraded Sprint PCS ( PCS) to outperform from strong buy, saying a possible stock combination with Sprint ( FON) would hurt PCS shares.

SG Cowen analyst Tom Watts said a combination of PCS and Sprint's stock is increasingly probable, and that he expects a 21% downside to PCS shares.

Watts likes AT&T Wireless ( AWE), which he rates a strong buy and is his top pick in the industry, as well as Nextel ( NXTL).

Shares of PCS were unchanged around midday at $5.41 on Wednesday, while shares of Sprint were up 1.4% at $14.06. AT&T Wireless was up slightly at $7.48 and Nextel was up 3.7% at $14.60.

As originally published, this story contained an error. Please see Corrections and Clarifications.

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