The big news out of the telecom sector is Vodafone’s (NYSE: VOD) decision to sell its 45% stake in Verizon Wireless to Dow component Verizon (NYSE: VZ) for $130 billion in one of the sector’s largest deals on record.
News of large-scale telecom mergers and acquisitions activity has put the spotlight on the iShares U.S. Telecommunications ETF (NYSEArca: IYZ) and the Vanguard Telecom Services ETF (NYSEArca: VOX). That is understandable because IYZ and VOX are the two largest U.S.-focused telecom ETFs, but both lack significant exposure to Vodafone. [Telecom ETFs Look Undervalued]
Investors looking for broader access to a possible return of telecom sector M&A should focus on those ETFs with ample Vodafone exposure because the U.K.-based company could be a buyer or a target. After the Verizon deal, AT&T (NYSE: T) could pay up to $124 billion for what’s left of Vodafone, reported Matthew Campbell and Amy Thomason for Bloomberg, citing Sanford C. Bernstein analyst Robin Bienenstock.
Whether Vodafone is a possible buyer or potential prey, the ways to play options lie with ETFs such as the iShares Global Telecom ETF (NYSEArca: IXP). AT&T and Vodafone are IXP’s top-two holdings, combing for over 29% of the ETF’s weight. Importantly, IXP is also home to companies that AT&T has reportedly mulled deals with in the past and firms that Vodafone itself could afford to acquire after selling its Verizon Wireless stake. [ETFs for Telecom Mergers and Acquisitions]
Those companies include Spain’s Telefonica (NYSE: TEF), Germany’s Deutsche Telekom and Orange. Vodafone’s cash hoard will be more than recent market values for Orange or Telecom Italia, also a member of IXP’s lineup, according to Bloomberg. IXP is home to 36 stocks and over $526 million in assets under management.