Fisher Investments on Telecom

The Fisher Investments On series is designed to provide individual investors, students, and aspiring investment professionals the tools necessary to understand and analyze investment opportunities—primarily for investing in global stocks.

Each guide is an easily accessible primer to economic sectors, regions, or other components of the global stock market. While this guide is specifically on Telecom, the basic investment methodology is applicable for analyzing any global sector, regardless of the current macroeconomic environment.

Following a top-down approach to investing, Fisher Investments on Telecom can help you make more informed decisions within the Telecom sector. It skillfully addresses how to determine optimal times to invest in Telecom stocks and which Telecom industries have the potential to perform well in various environments.

Divided into three comprehensive parts—Getting Started, Telecom Details, and Thinking Like a Portfolio Manager—Fisher Investments on Telecom:

• Explains some of the sector’s key macro drivers—like interest rates, regulation, and risk aversion
• Shows how to capitalize on a wide array of macro conditions and industry-specific features to help you form an opinion on each of the industries within the sector
• Takes you through the major components of the industries within the global Telecom sector and reveals how they operate
• Offers investment strategies to help you determine when and how to overweight specific industries within the sector
• Outlines a five-step process to help differentiate firms in this field—designed to help you identify ones with the greatest probability of outperforming

Filled with in-depth insights, Fisher Investments on Telecom provides a framework for understanding this sector and its industries to help you make better investment decisions—now and in the future. With this book as your guide, you can gain a global perspective of the Telecom sector and discover strategies to help achieve your investing goals.

Foreword ix

Preface xiii

Acknowledgments xvii

Part I Getting Started in Telecom 1

Chapter 1 Telecom Basics 3

Telecom 101 4

A Defensive Sector 5

Inelastic Demand 11

A Capital Intensive Sector 12

Regulation 14

Chapter 2 A Brief History of the Telecom Industry 19

The Early Years 19

Recent History 24

Chapter 3 Telecom Sector Composition 31

Global Industry Classification Standard (GICS) 31

Global Telecom Benchmarks 32

Industry Breakdown 38

Same, Same, but Different 41

Part II Next Steps: Telecom Details 43

Chapter 4 Telecom Sector Drivers 45

Economic Drivers 46

Political Drivers 51

Sentiment Drivers 56

Chapter 5 Consumer Demand 61

Emerging Markets 61

Developed Markets 66

Chapter 6 Challenges and Opportunities 71

Wireline 72

Wireless 78

Advertising & Publishing 82

Part III Thinking Like a Portfolio Manager 85

Chapter 7 The Top-Down Method 87

Investing Is a Science 87

Einstein’s Brain and the Stock Market 89

The Top-Down Method 90

Top-Down Deconstructed 96

Managing Against a Telecommunications Benchmark 103

Chapter 8 Security Analysis 107

Make Your Selection 108

A Five-Step Process 109

Telecom Analysis 117

Chapter 9 Telecom Investing Strategies 123

Strategy 1: Adding Value at the Sector Level 124

Strategy 2: Adding Value at the Country or Industry Level 125

Strategy 3: Adding Value at the Security Level 126

Appendix: Additional Resources 129

Notes 137

Glossary 141

About the Authors 151

Index 153

DAN SINTON is a Research Analyst at Fisher Investments. Prior to joining Fisher, he worked at Franklin Templeton and Charles Schwab and in the nonprofit sector. Dan received a BA in international affairs at the University of Colorado and an MBA from Georgetown University. He currently lives in San Francisco, California.

ANDREW S. TEUFEL has been with Fisher Investments since 1995 where he currently serves as a Vice Chairman. Prior to joining Fisher Investments, he worked at Bear Stearns as a corporate finance analyst in its Global Technology Group. Andrew also instructs at many seminars and educational workshops throughout the United States and United Kingdom, and has lectured at the Haas School of Business at UC Berkeley. He is also Editor in Chief of MarketMinder.com. Andrew is a graduate of UC Berkeley.

The Fisher Investments On series is designed to provide individual investors, aspiring investment professionals, and students the tools necessary to understand and analyze investment ­opportunities—primarily for investing in global stocks.

Each guide is an easily accessible primer to economic sectors, regions, or other components of the global stock market. While this guide specifically focuses on Telecommunication Services (a.k.a. Telecom), the basic investment methodology is applicable for analyzing any global sector, regardless of the current macroeconomic environment.

Following a top-down approach to investing, Fisher Investments on Telecom can help you make more informed decisions within the Telecom sector. It skillfully addresses how to determine optimal times to invest in Telecom, and which Telecom industries have the potential to perform well in various environments.

Divided into three comprehensive parts—Getting Started, Telecom Details, and Thinking Like a Portfolio Manager—Fisher Investments on Telecom:

• Explains some of the sector’s key drivers—like its defensive characteristics, sentiment, and regulation
• Shows how to capitalize on a wide array of macro conditions and industry-specific features to help you form an opinion on each of the industries within the sector
• Takes you through the major components of the industries within the global Telecom sector and reveals how they operate
• Offers investment strategies to help you determine when and how to overweight specific industries within the sector
• Outlines a five-step process to help differentiate Telecom firms—designed to help you identify those with the greatest probability of outperforming.

Filled with in-depth insights and expert advice, Fisher Investments on Telecom provides a framework for understanding the Telecom sector and its industries to help you make better investment decisions—now and in the future. With this book as your guide, you can gain a global perspective of the Telecom sector and discover strategies to help you achieve your investing goals.