The major news in this sector is the possible AT&T merger with T-Mobile. We do not feel that it will occur because the created company would possibly violate antitrust laws and reduce competition in the marketplace.
Other research on this sector shows that pre-paid plans are rising in popularity as many Americans become unable to pay for pricey contracts, especially now that both AT&T and Verizon Wireless have gotten rid of their intermediary one year-long contract options. Verizon Wireless has also followed AT&T in discontinuing their unlimited data plan, a move that might indicate that customers of both companies are not subscribing to the more costly, higher minutes per month plans. The introduction of tiered data pricing also demonstrates the growing wireless data usage of smartphones in the U.S.
This industry is generally defensive but has on the whole been slightly out-performing the S&P 500. With consistently high dividends in this sector, we feel it is best to keep our neutral weighting, but look to diversify our portfolio with foreign providers, internet operators, and infrastructure owners. Potential holdings include Dish Network (DISH), DirectTV (DTV), TimeWarner (TWX), and China Telecom (CHA).
Acess the full report here: Fall 2011 Telecoms Sector Report