Chapter 4

TELECOM SECTOR DRIVERS

First of all, what is a driver? Drivers are factors that impact—positively or negatively—the performance of stocks, industries, sectors, and the entire market. In this chapter, we’ll look at how drivers impact the performance of Telecom—both the broad category and individual stocks—relative to the benchmark.

There are three broad categories of drivers you can use to examine the forward-looking prospects for any stock market sector:

1. Economic Drivers

2. Political Drivers

3. Sentiment Drivers

Drivers—in any of these categories—impact Telecom’s relative performance in a variety of ways: They may affect earnings, profitability, growth, cost of capital, industry regulations, and investors’ appetite for risk, among other things. But investors should primarily be concerned about how drivers ultimately impact investment returns relative to the broader market.

As you learn about drivers in this chapter, it’s important to remember the relative importance of different drivers varies throughout time—this is especially true in Telecom, which has undergone significant structural changes and become much more competitive as deregulation has progressed globally. Often, different drivers point in different directions, and it is up to investors to determine which drivers are most important at any given point.

ECONOMIC DRIVERS

A full book could easily be devoted to economic drivers, but this section will focus on the macroeconomic drivers most applicable to the ...

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