This is quite the spin as the telco monoploy continues...
Telecommunications sector begins to revive
Telecommunica-tions investing is back. Resuscitated by dramatic
acquisitions and expanding technologies, it is trying to shake off the
depression that overtook it after the technology bust.
Telecom funds are up 11 percent this year and 29 percent in the past 12
months, according to Lipper Inc., outpacing the broader market. Yet this
complex field, which combines advanced technology and traditional
telecommunications utilities, remains unpredictable.
Take the dramatic change that has shaken up the industry of late:
SBC Communications bought AT&T, changed its name to AT&T and then agreed
to acquire BellSouth; Sprint merged with Nextel; Verizon Communications
bought MCI; France's Alcatel agreed to buy Lucent Technologies;
Telefonica of Spain bought British wireless provider O2 PLC; and eBay
acquired Internet phone service Skype.
China Mobile Communications Corp. is aiming to bid for telecoms around
"Twenty years ago, government was trying to put more regulation on the
telecom industry to try to tear down large companies, but now
everything's in the opposite direction," said Matthew Wu, portfolio
manager of Rydex Telecommunications Fund "A" (RYTLX), up 9 percent this
year and 22 percent the past 12 months. "Diversified telecom companies
have high fixed costs, so expect mergers and acquisitions to continue as
they seek improved economies of scale."
The sector's volatile history shouldn't be ignored. Yet a powerful new
driver is the fact so many countries now demand state-of-the-art
"The resurgence in telecommunications is due to an international burst
of interest in connecting people wirelessly," said Albert Lin, co-head
director of research for American Technology Research Inc. in San Francisco.
The key to handicapping which companies will be winners, losers,
acquirers, acquired or failures is to follow the technology and discard
usual company labels, experts said.
"Investors can no longer just look at the past performance of telecoms
and how they've managed their businesses, but need to look deeper at
their technologies and core values," said David Weissman, senior analyst
with Zacks Equity Research in Chicago.
Strong telecom fund performers have recently been ProFunds Ultra
Telecommunications Services (TCPSX), up 15 percent in 2006 and 17
percent the past 12 months; Fidelity Select Telecommunications (FSTCX),
up 10 percent and 25 percent; and T. Rowe Price Media and
Telecommunications (PRMTX), up 14 percent and 39 percent.
But for those interested in individual stocks, owning shares in several
successful giants would be a sensible move right now, experts say:
• Sprint Nextel Corp. (S), which has done a decent job of retaining
customers following its merger and also has spun off its declining
Embarq Corp. local telephone unit, is a Weissman recommendation.
• Verizon Communications Inc. (VZ) is a Lin choice because it is such a
large operator and boasts the most loyal and financially attractive
wireless customer base.
• Nokia Corp. (NOK), which has regained its momentum by offering new
cell phones at both ends of the price spectrum, is likely to remain No.
1 in handsets for some time, Lin said.
WISPA Wireless List: email@example.com