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UPDATE 1-U.S. index providers propose overhauling telecom index

(Adds details on proposed changes and background on the indexes throughout)

NEW YORK, July 11 (Reuters) - Two major U.S. stock index providers on Tuesday proposed doing away with the telecommunication services sector in widely used equity benchmarks to reflect major industry changes in the past two decades.

S&P Dow Jones Indices and MSCI Inc, which together manage the Global Industry Classification Standard (GICS) industry taxonomy for indexes, are proposing to rename the index and add a host of new companies.

The new Communication Services Sector would include telecom companies as well as media, entertainment, consumer internet and digital services companies that belong to the consumer discretionary and information technology sectors, the index companies said in a joint statement.

After years of consolidation and diversification, today's telecom sector would be unrecognizable to original investors in the index, which was created in 1996.

The consultation will start on Tuesday and changes will be announced by November, the statement said.

S&P Dow Jones Indices is a venture of S&P Global Inc and CME Group Inc.

Reuters reported in May that the index providers were considering restructuring the once-hot index which has shrunk to just four companies from 14. Regional telecom operator CenturyLink Inc plans to buy Level 3 later this quarter, a deal that would leave the index with just three companies.

Since slow-growing telecom operators are notable for their high dividend yields, some investors argued they should be added to the utilities index. (Reporting by Trevor Hunnicutt, additional reporting by Caroline Valetkevitch; Editing by Sandra Maler and Richard Chang)