Investor's Business Daily, May 24th, 2007
Investors in European telecom stocks have worried about rumors the EU soon would cap roaming charges on cell phone calls, hurting profits. That is until new rumors surfaced about possible mergers.
The big players, Vodafone VOD, France Telecom FTE and Deutsche Telekom DT of Germany all gapped up Wednesday.
News reports said Deutsche Telekom is considering buying France Telecom's Dutch Orange, which could be worth as much as $2.2 billion. The French firm said it is interested in a Spanish Internet provider owned by Deutsche Telekom, which also is being eyed by Vodafone.
On top of that, rumors spread that Vodafone may offer a higher-than-expected dividend when it reports full-year results next week.
A jump in the European blue chips rang up ETFs focused on foreign telecoms.
WisdomTree Vs. IShares
WisdomTree International Communications Index DGG jumped almost 2% on double average daily volume.
The fund spans 20 countries, with 20.98% of assets in United Kingdom firms, 15.62% in France, 7.6% each in Australia, Spain and Hong Kong, and 7.05% in Germany.
Of the 122 holdings, the top five account for 40% of assets. The top 10 holdings account for 61% of assets. The largest, Vodaphone, makes up 9.61%, followed by France Telecom at 9.35%, Deutsche Telekom at 6.9%, China Mobile CHL at 6.61%, and Spain's Telefonica TEF at 6.32%.
It has returned 23% in the past year, as of May 23. It is up 11% year to date and offers a 0.6% dividend.
IShares S&P Global Telecommunications Sector Index IXP is 35% U.S. and only 65% foreign.
U.K. firms take up 14.41%, followed by Spain, 7.87%; Japan, 7.62%; France, 4.92%; and Canada, 4.2%.
The fund is concentrated in AT&T T at 17.96%; Vodafone, 10.25%; Verizon Communications VZ, 8.05%; Telefonica, 7.87%; and Nippon Telegraph & Telephone NTT, 4.01%. The top 10 holdings control 66% of assets.
IShares S&P Global Telecom flew 40% in the past 12 months and gained 12% year to date.
Telecoms On The Rise
Emerging-Market Telecommunications ETF, an actively-managed closed-end fund, complements exposure to developed countries.
Its 12-month return of 81% dwarfs the other two. It's jumped 21% this year, as of May 23.
The heaviest country weightings are Mexico at 19.86%; Hong Kong, 16.04%; Russian, 10.22%; South Africa, 7.56%; and Brazil, 6.08%
Top holdings: China Mobile at 16.04% of assets; Mexico's America Movil AMX, 14.46%; South Africa's MTN Group, 6.43%; and PT Telekomunikasi Indonesia, 4.69%.
China Mobile and America Movil may be classed as emerging market plays, but they are among the five largest in the world.
