Technology, Media and Telecom Sector Definition

The technology, media and telecom (TMT) sector, sometimes also referred to as technology, media, and communications (TMC), is an industry sector used by investment bankers, investors, traders and other market participants.

Because this industry segment covers a broad range, it is often useful to break down TMT into subsectors such as semiconductors, hardware, software, mobile, Internet, networking, etc. Because this sector contains new and high-tech firms, it experiences a large amount of mergers, acquisitions and initial public offerings (IPOs).

The TMT sector includes a wide range of companies, but they are interrelated in that they heavily depend on research & development (R&D), the value of patents and other intellectual property protections and preferring rapid company growth. As a result, the valuations of companies in this industry segment may tolerate relatively high price-to-earnings (P/E) ratios in favor of enterprise-value-to-sales (EV/Sales).

Within the TMT sector, it is useful to subdivide it into relevant subsectors. Each subsector has different properties and mechanics that make valuing them different. Each also has different growth metrics and prospects. For example, the telecom sector is driven by the shift toward growth in wireless and the shift away from pay TV. Meanwhile, the Internet subsector is led by a rise in e-commerce and social.

Semiconductor manufacturers develop and produce integrated circuits and microchips used in all sorts of applications from personal computers and mobile devices to robotics and industrial machinery. Some representative firms are Intel, AMD, Texas Instruments and Nvidia.

The telecom part focuses on communications-related businesses such as phone, TV and Internet service providers and includes players such as AT&T, Verizon and Sprint.

The hardware companies include computer makers – IBM, Dell and HP – but also makers of server systems, mobile device handsets, tablets and storage devices such as hard drives and memory. Internet companies exist online and include companies like Facebook, Groupon, LinkedIn and Zynga.

Software companies produce computer or mobile applications for both individuals and enterprise and include Microsoft, Adobe, and SAP. Networking companies maintain, install, and produce components for wired and wireless computer networks including fiber optic cable, switches and routers. Some big players in the networking space include Cisco Systems, Juniper Networks, Netgear and Ciena Corporation.

Media companies develop, produce and distribute multimedia content on TV, radio, in print and online. Television networks, cable TV providers, production studios and social media companies may all be included in this subsector.

• The technology, media and telecom sectors is often broken up into subsectors, such as semiconductors, Internet and mobile.
• TMT as a high amount of M&A activity and IPOs.
• TMT companies trade at relatively high valuation multiples, such as P/E and EV/Sales ratios, compared to other sectors.

Different market participants may categorize different TMT companies in different subsectors. Facebook may be viewed as either Internet or media, and Apple as Internet, hardware, software and media, depending on who is judging the company.

Other examples that cross subsectors are Hulu, Amazon and Netflix. Sometimes, companies in one subsector of TMT will merge or acquire another to consolidate, diversify and broaden product offerings. This has been seen in the examples of the merger of AOL and Time Warner in 2000, with AT&T and Dish Network joining forces in 2015, and the Dell-EMC merger happening that same year.