US index providers propose telecoms reclassification

By:
Natalie Bannerman
Published on:

Two US stock index providers are proposing the inclusion of consumer discretionary and information technology companies under the classification of telecoms

S&P Dow Jones Indices and MSCI Inc, two major stock index providers in the US are suggesting an overhaul on the way in which they classify telecommunication companies within their equity benchmarks.

In line with changes in the industry over the last 20 years, the new proposal asks for the inclusion of companies not considered pure telecoms. 

Therefore some media, entertainment, consumer internet and digital services companies which are currently classified as under the consumer discretionary and information technology sectors can be included in the telecoms classification. Companies include the likes of: Facebook, Google, eBay and Comcast Corp.

The proposition also calls for the renaming the sector SPLRCL, as part of the Global Industry Classification Standard.

"You're looking at everything in there, and it could also lead to new sub-industries within existing ones. The existing groups could be totally changed," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. "Nothing has been predetermined and set."

The consultation is due to begin next week with potential changes announced sometime in November and changes to take affect from 2018.

Speaking to Reuters Bucky Hellwig, senior vice president at BB&T Wealth Management, said it "doesn't seem realistic" to include big tech names with telecom firms.In Hellwig's opinion: "you could make a more rationale case for putting some of the media companies in with telecom."