STL recently put forward a popular view of telecoms as a defensive sector in today's financial and economic turmoil. Still, they feel things could change:
The audience at our November event seemed comforted by the appeal which the capital markets currently find in telecom as a defensive sector. However, we also stressed that this is likely to be a fleeting phase, as underlying concerns about the industry’s ability to generate sustainable value will return.
I do not wish to contest STL's views on telco transformation, but I feel something is missing in this (vastly simplified) summary: probably every industry sector faces challenges, some even bigger than those plaguing telecoms. Obviously, financials come to mind, but healthcare, IT, oil & gas and automobiles have a few issues to sort out as well. Personally, I wouldn't be comfortable predicting which sector is set to outperform the others next year.
Somehow, this ties nicely into Kai's (not entirely serious) call for government support of the telco sector, a while ago. Apparently, he was disgruntled over the amount of funds available to bail out financials and the automobile sector that haven't been able to regulate themselves. Why shouldn't FTTH operators get government support as well?
What follows from combining these two posts is that consultants and researchers (instead of Kai's FTTH operators) should step in and replace the sell-side analysts that have lost their jobs over the past few months (by adding investment recommendations to their industry knowledge). Of course, there is some work to be done, but the very fundamental changes of the financial industry could provide industry experts and consultants with a unique opportunity to venture into a new area and serve a new set of customers. They could be much better equipped to serve the buy-side than the average financial analyst. To loosely quote a buddy of mine (who still has his Wall Street sales job):
To say that stocks are cheap, based on current P/E ratios, shows an appalling lack of historic perspective that plagues the sell-side. Low P/E ratios probably imply that earnings projections are still way too high. It should be commonly known: C-level execs are the very last people to update their views to altered market conditions; only to be followed by sell-side analysts.