Global Investing

CHAPTER 9Communication Services

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The global communication services sector includes companies providing wired and wireless phone services, interactive media (such as social media platforms), media content, home entertainment, gaming, and advertising. At one time the communications sector was regarded as defensive, generating consistent profits regardless of fluctuations in economic growth. However, the composition of the sector has undergone significant transformation in recent years. Traditional advertising and wired telecommunications have been surpassed by internet-based media and services as well as wireless communications as the primary forms of communication. Newer industries within this sector, such as interactive media, offer higher growth rates than were available historically, but companies in these industries typically come with a higher degree of earnings variability when compared to the sector's legacy businesses.

Data source: Bloomberg, as of March 18, 2022.

When compared to the market (previously defined in the beginning of Part Five), the average communication services companies mentioned in this chapter have traded at similar valuations over the past few years while generating above-average growth in profits. As a group, they also had lower debt levels and paid competitive dividend yields compared to the market. Relative share price performance ...