New research from global index provider FTSE Russell supporting the recent Industry Classification Benchmark (ICB) sector realignment for its Russell US Indexes helps underscore a notable shift in the US telecommunications industry.
Historically viewed through the relatively narrow lens of traditional, old line telephone companies such as AT&T and Verizon, FTSE Russell has observed a dramatic transformation of this industry as business lines have converged across media, communications and content.
In fact, when FTSE Russell analyzed the last 15 years of performance for industry sector groupings within the Russell 3000® Index—which represents the 3000 largest US stocks—the performance correlation was higher between Telecommunications and Cable Television Services companies than between Telecommunications and Telecommunications Equipment companies. This analysis has led FTSE Russell to add the Telecommunications Equipment (including companies like Cisco Systems and Motorola Solutions) and the Cable Television Services (including companies like Comcast and Liberty Broadband) areas, previously included with Technology and Consumer Discretionary respectively, to the Telecommunications industry.
Catherine Yoshimoto, director, equity index product management:
“In migrating the Russell US Indexes to the new ICB framework, we have been able to reset our sector framework to reflect the current state of the US equity markets. In the case of the ICB Telecommunications industry, our research has confirmed that a combination of service providers that own or manage the infrastructure to distribute media content with companies that sell and service the equipment that enable these services best represents the evolving dynamics of this very important industry.”
For more insight on the ICB enhancements, you can access the FTSE Russell research paper—Industry Classification Benchmark (ICB) reclassification.
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