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ETF Specialist

Telecom at a Crossroads: What ETF Investors Need to Know

Given so much ongoing M&A activity, the telecom sector has been capturing a considerable amount of headlines lately. Below, a look at what is going on in the industry, and ways ETF investors can invest in telecom.

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The U.S. telecommunications sector currently sits at something of a crossroads.

While the sector remains dominated by heavyweights  AT&T (T) and  Verizon Communications (VZ), a raft of merger-and-acquisition activity is going on among the next-largest carriers in a process whose outcome is far from clear. Although most carriers have done a solid job managing and navigating the ongoing transition from voice service to data service, all players are grappling with how industry pricing will shake out, particularly in light of the ongoing consolidation activity. Positively, the telecom sector certainly is not the roll-up sector that it once was, and--with several notable exceptions--its participants aren't facing significant financial leverage. In fact, several players now pay significant dividends, and many have the flexibility to make the kinds of capital investments necessary to strengthen their networks.

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Robert Goldsborough does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.