A different kind of oil shock

It's not often that I get to write about the oil industry as a telco disruptor, but today Shell, which is a gargantuan entity broken into two separate listed companies (one UK, representing 40% of the equity, one Dutch, representing 60%) has decided to merge the two under a single board and list everything in London. Why should we care? Well, all things being equal, this will take Shell's weighting in the FTSE 100 from 3.8% to nearer 8%, which means that the weightings of other companies should fall by about 4.4% from where they are now.

Biggest telco victim - Vodafone, which we worked out should move from 8.21% of the index, to 7.86%. BT Group should go from 1.4% to 1.34%. These don't look like big drops on the face of it, but when the fund managers run this through their sector weighting models, coupled with whatever their own sector preferences might be, we could see some technical selling around this. The company is going to maintain a Dutch listing as far as we are aware, though whether it will still account for 12% of the market's capitalization in future is unclear. So perversely, KPN, one of the most embattled telcos in Europe, may go up on technical grounds.