Market Overview

More To Come? ETFs For Telecom M&A...Or Not


Are big things afoot in the telecom sector following AT&T's (NYSE: T) $39 billion purchase of T-Mobile? Is there a partner out there for Sprint (NYSE: S), soon to be the smallest of the U.S. wireless carriers assuming the AT&T/T-Mobile deal gets done?

Keep in mind the AT&T deal is no lock as it faces heavy regulatory scrutiny, but we know this much: The telecom sector has at least morphed from really boring to worth watching over the medium-term. Even in the absence of more consolidation, there are few ETFs worth keeping an eye on.

1) iShares Dow Jones U.S. Telecommunications Index Fund (NYSE: IYZ): If you can't decide between AT&T and Verizon (NYSE: VZ), IYZ is the fund for you as the two Dow components combine for over 28% of the ETF's weight. IYZ is also home to high-yielders such as CenturyLink (NYSE: CTL). Good liquidity, a 3% yield and a decent expense ratio of .48% mean this ETF could be an excellent telecom stock replacement tool.

2) Vanguard Telecommunication Services ETF (NYSE: VOX): VOX really doesn't need much of an explanation. It's IYZ with half the fees. Vanguard does it again.

3) SPDR S&P International Telecommunications Sector ETF (NYSE: IST): IST isn't going to win any daily volume awards and it's expense ratio of 0.5% is higher than both IZY and VOX, but a yield of 4.3% is nice, but this fund has some merit. Deutsche Telekom is IST's fourth-largest holding and that company will retain 8% of T-Mobile, making it a winner assuming the AT&T deal gets regulatory approval.

In addition, Vodafone (NYSE: VOD) is IST's top holding with a weight of over 20% and that company is a play on almost half of Verizon Wireless. Since this is an international fund, let's clear up it focuses almost entirely on developed markets.

4) iShares S&P Global Telecommunications Index Fund (NYSE: IXP): Think of IXP as a combination of IST and VOX or IYZ. You get AT&T, Verizon, Deutsche Telecom and Vodafone with an emerging markets kicker. China Mobile (NYSE: CHL) and America Movil (NYSE: AMX), the largest Latin American wireless carrier, can also be found in the top-10. IXP also has lower fees than IST. For those that want it all in one telecom ETF, IXP may be the pick of the litter.

Posted-In: Long Ideas News Sector ETFs Short Ideas Emerging Market ETFs M&A Global Intraday Update


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