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Will Trump Put Breaks on AT&T-Time Warner Deal? ETFs in Focus
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The trend of consolidation in the telecom and media sectors received a major thrust after the $85.4 billion deal between U.S. telecom behemoth AT&T Inc. (T - Free Report) and media giant Time Warner Inc. . If the proposed merger materializes, the combined entity will become a major player in the consolidated telecom-media space (read: Acquisition Talks Boost Time Warner; Hit AT&T: ETFs in Focus).
However the deal can be jeopardized as President-elect Donald Trump, who spoke against the deal in his campaign, remains against it and considers it a “bad deal” as per a Bloomberg report. Per the report, Trump is against such a deal as it will consolidate too much power in the media industry. Shares of AT&T were down 0.3%, while Time Warner's stock was down 1.7% on such reports.
AT&T is the second-largest telecom operator with a nationwide presence in both the wireless and wireline front. The company is one of the largest pay-TV operators in the U.S., thanks to its acquisition of leading satellite TV operator, DIRECTV. The proposed merger with Time Warner will provide AT&T a portfolio of lucrative contents. Time Warner's media empire includes HBO and Turner Broadcasting, which has the rights to sports telecasts. It also owns the Warner Bros. film studio and cable networks TNT, TBS and CNN. Moreover, Time Warner owns a 10% stake in Internet video provider, Hulu (read: ESPN Woes Continue to Haunt Disney, ETFs in Focus).
Traditional telecom and pay-TV operators are facing severe competitive threat at present where success depends largely on technical superiority, quality of services and scalability. Several tech giants like Alphabet, Facebook and Amazon have entered the telecom-media space. Cut-throat pricing competition has put pressure on margins.
ETFs in Focus
Needless to say, if such a big deal comes under scrutiny, it will invariably put ETFs heavy on AT&T and Time Warner in focus. Investors interested to take position on the basis of this deal could consider the ETFs mentioned below. These products could see elevated trading volumes ahead.
PowerShares Dynamic Media Portfolio ETF
This fund tracks the Dynamic Media Intellidex Index. The ETF holds a small basket of 30 media stocks with TWX taking the fourth spot in the fund with about 5.1% weight. The product has amassed $84.1 million in its asset base while trading in light volume of about 20,000 shares a day. The ETF charges 61 bps in annual fees and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook (read: Halloween Less Scary This Year: 4 ETF Treats)
PowerShares Dynamic Leisure and Entertainment Portfolio ETF (PEJ - Free Report)
This fund tracks the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 30 companies. Here, TWX takes the fourth position with 5.1% weight at the third spot. The ETF has amassed $148.1 million in its asset base and trades in volume of around 40,000 shares a day on average. Expense ratio came in at 0.61%. PEJ has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook.
This ETF tracks the performance of the MSCI USA IMI Telecommunication Services 25/50 Index. The fund manages assets worth nearly $131.5 million and has an average trading volume of roughly 50,000 shares a day. The fund charges an expense ratio of 8.4 basis points a year. The fund holds 31 stocks., AT&T is among the top three individual holdings with asset allocation of 22.5%. The product currently has a Zacks ETF Rank #4 or ‘Sell’ rating with a Medium risk outlook (read: Telecom ETFs in Red Following Mixed Earnings).
This ETF seeks to track the performance corresponding to the benchmark MSCI US Investable Market Telecommunication Services 25/50 Index. It has assets under management of nearly $1.5 billion and an average trading volume of roughly 194,000 shares a day. The fund charges an expense ratio of 10 basis points a year.
The fund holds 30 stocks in its portfolio and AT&T takes the top positon with 22.7% exposure. The fund currently has a Zacks ETF Rank #4 with a Medium risk outlook.
This ETF tracks the S&P Global 1200 Telecommunications Services Sector Index. The fund has nearly $306.6 million of assets under management and an average trading volume of roughly 30,000 shares a day. The fund charges an expense ratio of 48 basis points a year. The fund holds 33 stocks in its portfolio and AT&T has the top spot with 20.1% exposure. IXP currently has a Zacks ETF Rank #4 with a Medium risk outlook (see: all Telecommunication ETFs here).
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Will Trump Put Breaks on AT&T-Time Warner Deal? ETFs in Focus
The trend of consolidation in the telecom and media sectors received a major thrust after the $85.4 billion deal between U.S. telecom behemoth AT&T Inc. (T - Free Report) and media giant Time Warner Inc. . If the proposed merger materializes, the combined entity will become a major player in the consolidated telecom-media space (read: Acquisition Talks Boost Time Warner; Hit AT&T: ETFs in Focus).
However the deal can be jeopardized as President-elect Donald Trump, who spoke against the deal in his campaign, remains against it and considers it a “bad deal” as per a Bloomberg report. Per the report, Trump is against such a deal as it will consolidate too much power in the media industry. Shares of AT&T were down 0.3%, while Time Warner's stock was down 1.7% on such reports.
AT&T is the second-largest telecom operator with a nationwide presence in both the wireless and wireline front. The company is one of the largest pay-TV operators in the U.S., thanks to its acquisition of leading satellite TV operator, DIRECTV. The proposed merger with Time Warner will provide AT&T a portfolio of lucrative contents. Time Warner's media empire includes HBO and Turner Broadcasting, which has the rights to sports telecasts. It also owns the Warner Bros. film studio and cable networks TNT, TBS and CNN. Moreover, Time Warner owns a 10% stake in Internet video provider, Hulu (read: ESPN Woes Continue to Haunt Disney, ETFs in Focus).
Traditional telecom and pay-TV operators are facing severe competitive threat at present where success depends largely on technical superiority, quality of services and scalability. Several tech giants like Alphabet, Facebook and Amazon have entered the telecom-media space. Cut-throat pricing competition has put pressure on margins.
ETFs in Focus
Needless to say, if such a big deal comes under scrutiny, it will invariably put ETFs heavy on AT&T and Time Warner in focus. Investors interested to take position on the basis of this deal could consider the ETFs mentioned below. These products could see elevated trading volumes ahead.
PowerShares Dynamic Media Portfolio ETF
This fund tracks the Dynamic Media Intellidex Index. The ETF holds a small basket of 30 media stocks with TWX taking the fourth spot in the fund with about 5.1% weight. The product has amassed $84.1 million in its asset base while trading in light volume of about 20,000 shares a day. The ETF charges 61 bps in annual fees and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook (read: Halloween Less Scary This Year: 4 ETF Treats)
PowerShares Dynamic Leisure and Entertainment Portfolio ETF (PEJ - Free Report)
This fund tracks the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 30 companies. Here, TWX takes the fourth position with 5.1% weight at the third spot. The ETF has amassed $148.1 million in its asset base and trades in volume of around 40,000 shares a day on average. Expense ratio came in at 0.61%. PEJ has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook.
Fidelity MSCI Telecom Services ETF (FCOM - Free Report)
This ETF tracks the performance of the MSCI USA IMI Telecommunication Services 25/50 Index. The fund manages assets worth nearly $131.5 million and has an average trading volume of roughly 50,000 shares a day. The fund charges an expense ratio of 8.4 basis points a year. The fund holds 31 stocks., AT&T is among the top three individual holdings with asset allocation of 22.5%. The product currently has a Zacks ETF Rank #4 or ‘Sell’ rating with a Medium risk outlook (read: Telecom ETFs in Red Following Mixed Earnings).
Vanguard Telecommunication Services ETF (VOX - Free Report)
This ETF seeks to track the performance corresponding to the benchmark MSCI US Investable Market Telecommunication Services 25/50 Index. It has assets under management of nearly $1.5 billion and an average trading volume of roughly 194,000 shares a day. The fund charges an expense ratio of 10 basis points a year.
The fund holds 30 stocks in its portfolio and AT&T takes the top positon with 22.7% exposure. The fund currently has a Zacks ETF Rank #4 with a Medium risk outlook.
iShares Global Telecomm ETF (IXP - Free Report)
This ETF tracks the S&P Global 1200 Telecommunications Services Sector Index. The fund has nearly $306.6 million of assets under management and an average trading volume of roughly 30,000 shares a day. The fund charges an expense ratio of 48 basis points a year. The fund holds 33 stocks in its portfolio and AT&T has the top spot with 20.1% exposure. IXP currently has a Zacks ETF Rank #4 with a Medium risk outlook (see: all Telecommunication ETFs here).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>