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The Ultimate Guide to Investing in 5G Technology

01.03.2019 | Ben Phillips, CFA

5g telecom stocks investment playbook

The EventShares Policy Playbook series is a group of concise, client-friendly research reports highlighting key policy investment themes. Each Playbook covers background of the policy, U.S. industries and companies impacted, and the emerging opportunity. 

 

The 5G Telecom Playbook provides an in-depth overview of the policy, the size of the market opportunity, the investment case and timing. Download the full PDF to read the entire report.

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Policy Overview: What's Happening?

 

5G deployment is a geopolitical battleground. The US and China are racing to develop their respective 5G networks, and the winner will likely set the technical standards for 5G. Setting standards is important because it means the country's equipment will be used globally in smartphones and Internet of Things (IoT) objects like self-driving cars. The US views the latter as a national security threat and doesn't want to rely on a Chinese 5G network and standards.

 

 

The Numbers: Size of the Opportunity

 

  • 36% Annual Growth - Monthly data per smartphone estimated to increase to 49 GB by 2023 (7.2 GB in2017)
  • $130-150B Investment - Deloitte Consulting estimate of required investment in fiber infrastructure over the next 5-7 years
  • Market Size: $520B - Bain Consulting estimates the combined IoT markets will grow to $520 Billion in 2021 ($235 B in 2017)

 

 

Our Take: The Investment Case

 

The key use case driving 5G development is the improvement of mobile broadband services as capacity demand grows with mobile data traffic and IoT functionalities. 5G technology will allow for easier streaming of high definition media in both densely populated areas and when customers are out of reach of Wi-Fi hotspots.

To facilitate 5G deployment, new millimeter (mm) wave spectrum, which can transmit large amounts of data over short distance, will have to be freed up. Since mm spectrum can't travel far, new communications infrastructure, such as small cells, will need to be deployed and linked to current network infrastructure. Additional fiber will be needed to connect the core networks with the "edges" (e.g. small cells) of the networks.

This creates opportunities for companies to increase revenues by: (i) selling small cells, (ii) managing and performing the work to deploy new fiber, (iii) selling infrastructure utilized in the backhaul of signals, and (iv) network operators charging backhaul fees to use their networks.

 

 

Timing: Significant Actions Taken & Next Steps

 

The Federal Communications Commission (FCC) is currently undergoing its first mm Wave spectrum auction and has already scheduled a second for the back half of 2019. Both will free up spectrum used in 5G to densify networks. The FCC has also taken deregulatory steps, such as decreasing the allowed time for reviews associated with attaching small cells to existing structures and declaring small cells exempt from environmental and historic preservation review requirements (e.g. eliminates cost and delay when deploying small cells).

 

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