Monitoring the telecoms sector
Posted by Cloud Net on Wed, Mar 03, 2010 @ 04:47 AM
Monitoring The Telecoms Sector
The Stock Exchange maintains 2 sector indices for telecoms
1) The FTSE 350 - Fixed Line Telecomms Index
(Yes the stock exchange can't spell telecoms)
The index has a basket of 4 shares, which consists of Carphone Warehouse, Cable and Wireless, BT Group and Colt.
So how has it performed.?
Today the index is at about 1,700. In March 2007 it was hovering around 4,000, in 2008 about 2,800 , 2009 about 1400. So if you had invested 1,000 pounds in the sector in March 2007 it would now be worth about £425
The biggest player is of course BT so if you had made the same investment of £1000 in 2007 in BT how would you have performed? - and the answer is you would have £380 pounds left.
Over the last 3 years this has been the 4th worst sector after industrial metals, real estate and banks.
2) The FTSE 350 Mobile Telecommunications Index
This basket is even smaller consisting of Vodafone and Inmarsat.
Today the index is hovering around 3,270 with a value of about the same in 2007. So your £1,000 pounds would have stayed the same. It would have peaked in value in November 2007 at about £1320 and bottomed in October 2008 at about £740.
This performance places it as the 13th best out of 38 sector indices.
You may imagine that these baskets are pretty unique in consisting of such small numbers of companies but a brief examination shows that most baskets consist of a very small number of companies - in fact the automobiles and parts sector consists of 1 company - GKN. The largest baskets consist of financial companies and the largest basket of all is the equity investment instruments. (The best performing index over 3 and 5 years was oil equipment.)
This all shows that we have a mobile industry that is dominated by foreign brands with 02 being owned by Telefonica from Spain, Orange by France Telecom and T Mobile by Deutsche Telekom AG.
The fixed line industry by contrast continues to remain in UK hands and whilst it continues to be near the top of badly performing sectors league is pretty protected from takeover - no one would want it. However it's woes are nowhere near over as the sector which is the best performing sector in the world - VoIP- continues to attack and gain market share. The VoIP sector unfortunately for UK plc is dominated by the American consumer brands Vonage and Skype. VoIP for business as yet remains in UK hands with companies like Cloud Net making great strides to keep UK business supplied by UK business.
It will be interesting to see over the next few years just how this battle develops. I for one won't be betting on traditional land line businesses.