Telecom ETFs Look to Ring up Rebounds

“Over the last few years, the industry has been undergoing a transformation, with telecom companies foraying into content distribution, upstart wireless firms grabbing market share, increasing digital data usage, and more,” said Morningstar in a recent note.

In a uneven market where raw materials-related sectors are underperforming in a depressed commodities environment, the telecom space has stood out as a positive driver of market earnings. Telecom services are seen as one of the few ares of positive earnings growth. Consolidation trends loom large for telecom ETFs.

“It’s also unclear how the content play that some wireless firms have been ­engaging in will work out. If AT&T’s purchase of Time Warner goes through, it will own a lot of high-quality programming, such as HBO’s lineup, which could allow it to generate advertising revenues and reduce the price it pays to show content on its various platforms,” according to Morningstar. “It may also give subscribers content-specific benefits, similar to how AT&T provides customers free data streaming for DIRECTV Now. (AT&T purchased the satellite business in 2014.)”

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