Date of Graduation

5-2022

Document Type

UAF Access Only - Thesis

Degree Name

Bachelor of Science in Business Administration

Degree Level

Undergraduate

Department

Finance

Advisor/Mentor

Rennie, Craig G.

Abstract

The Communication Services Sector is one of the 11 GICS Sectors of the S&P 500. The Communication Services Sector is the newest of the GICS Sectors and formed in late 2018. This Sector contains 2 Industry Groups: Telecommunication Services and Media & Entertainment. This paper begins with a brief overview and background of the Communication Services Industry, will analyze the sector utilizing Porter’s Five Forces and business cycle analysis, and will conclude with how to conduct effective analysis on companies in the Communication Services Sector.

The Communication Services Sector as it is today formed in September of 2018 as a result of the shuffling of companies between the Consumer Discretionary and Information Technology Sectors. Big tech companies whose main line of business had shifted away from tech (Google), shifted into the new Communication Services Sector. Likewise, the large consumer discretionary companies who looked more like communication service firms than consumer discretionary firms (Netflix and Comcast) shifted to the Communication Services Sector.

We have not seen the current Communication Services Sector in the late stage of the business cycle as it is the most recent sector to be formed, so there is uncertainty on how this sector will react to the rising inflationary pressures and a looming recession. It is concluded that one should be slightly underweight in the Communication Services Sector due in part to this uncertainty of returns and volatility. Revenues from companies like AT&T and T-Mobile will stay relatively constant as households treat cellphones as a basic need. The average American cannot go an hour without looking at their phone and will surely continue to pay phone bills even during a potential economic recession. This is the only way to stay in constant contact with anyone worldwide. On the other hand, streaming service subscriptions will likely decrease as people would cancel a Netflix subscription before they cancel a phone plan. The above factors contribute to the uncertainty of revenues of communication services companies in the late stages of the business cycle, leading to an underweight in the industry.

Keywords

Telecommunication; major impact; communication services; stocks

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