5G Stocks

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5G Stocks TH E PATH FORWA R D IS PROFITA BL E WRITTEN BY THOMAS HUGHES

What Is 5G And Why You Should Care

5G is the fifth generation of modern cellular telephone technology. The two-letter name may not sound like much but it is a budding opportunity estimated to be worth $1.2 trillion by 2026 with some segments growing with a near-triple-digit CAGR. If the analysts are even close to right, the 5G industry at large will grow at a near 45% CAGR for the next seven (7) years and that is no joke. By the end of the decade, 5G will have impacted every life on the planet and touched our lives in ways that can only be imagined today. 5G technology was standardized by the 3GPP in 2018 and the world's largest telecoms have been scrambling to launch and expand their networks ever since. Like all cellular networks, service areas are divided into smaller units called cells that rely on radio waves to connect our phones to the closest antennae. 5G isn't much different from 4G technology except in the types of transmissions used to connect the network. 5G networks use higher-frequency radio waves that allow faster connection speeds but are limited by distance. There are three different frequency ranges that can be used, each requiring different types of antennae, but the best service areas will include a combination of all three. The main advantage of the 5G network is increased bandwidth. Increased bandwidth means faster download speeds that will eventually reach 10 Gb/sec. The increase in speeds will rival that of direct connections to the Internet making cell providers a viable alternative for WiFi users. The first networks were launched in 2019 and the roll-out has been accelerating ever since. The pandemic slowed the roll-out down, slightly, but even that hiccup is long past. As with most tech, especially Internet-related tech, the push for 5G has been accelerating in the post-COVID world because of our growing dependence on the Internet, the cloud, and eCommerce.

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5G Is Of Vital Importance

According to former FCC Chairman Ajit Pai, 5G is a critical development for the US and the world. The pandemic forced Americans to rely more heavily on the Internet than ever making 5G not just something we want, it's something we need. To that end, the FCC created a fast-track process for approving 5G infrastructure projects on Federally controlled lands that is helping the major wireless carriers expand their networks at mind-boggling speeds.

These are just a few of the industries that will be revolutionized by 5G.

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Gaming. Games will run faster, smoother, and look more realistic with more features.

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Virtual Reality. 5G will put reality in virtual reality.

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VOIP, Internet phone, and video messaging. Enjoy seamless, interruption-free video and

voice conferencing.

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Streaming media will no longer "buffer", a movie that may take 20 or 30 minutes to

download today will complete in minutes.

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Smart-City/Smart-Home/Smart-Business management.

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Smart cars, electric vehicles, and self-driving cars.

5G And The Internet of Things

Faster download speeds mean real-time connectivity. We have real-time today but it's more like, real-time* haha, because the 4G networks are slow. Not just that, but latency issues with sending data from a device to the cloud for processing really slow things down, that's why we have Edge Computing. Nothing on the Internet today really happens in "real-time" and that is a problem for the IoT.

The Internet of Things is all the connected devices in the world. Many of those connected devices are remote devices, either sensors, functional units, or portable workstations, and they all rely on phone/radio wave connections. There is a lot of promise in what the IoT can do for us but it will take true "real-time" connectivity to achieve it. That's where 5G comes into play.

To help put the IoT angle into perspective think about this. There were over 127 new IoT devices connected to the Internet PER SECOND in 2020 and analysts estimate more than 10 billion total at the end of 2021. That total will grow to 24.4 billion by 2030 and it will keep growing long into the future.

The Huawei Connection

Huawei is an integral cog in the 5G market. The problem is that Huawei is a Chinese-owned and headquartered company with possible ties to the Chinese government. That's why there is a risk Huawei could pose a threat to national security. The fear is that 5G equipment manufactured by Huawei could be used for spying. Whether or not that is true, the battle between the White House and Beijing will continue and Huawei will suffer for it.

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The Leading Players In The 5G Revolution

Verizon Is First But That Doesn't Mean Best

Verizon (NYSE: VZ) was the first to launch its 5g network but that doesn't mean it's the best. Despite its recurring place as top-rated for cellular servicing, it is falling behind in the ratings when it comes to 5G. One reason is the company is focused on a higher band of signals that is great for urban environments but lacking for other areas and that is causing connectivity issues. The advantage of higher band transmissions is speed. The high-band 5G networks offer the fastest speeds but only work well over the shortest distances. To combat this problem, Verizon is deploying a small-cell strategy that relies on denser coverage. As of the last count, Verizon was servicing more than 100,000 million Americans in 1,700 cities across the US. Verizon is the U.S.'s largest provider of cellular telecom services. The company boasts 120 million subscribers and that figure is still growing. The stock is also a dividend payer and one that we like. The yield is very attractive at 5.1% and there is a high expectation for distribution growth to compound returns.

AT&T Takes The Other Tack With 5G

AT&T (NYSE: T) has been making a heavy push into 5G because the company sees it as a growth opportunity. To that, we say duh. Instead of the faster high-band route, however, AT&T chose to use the lower band frequencies for their network ensuring wider, longer-distance coverage and it is working for them. The company is serving more than 225 million Americans in over 16,000 cities and towns. Along with the 5G rollout AT&T is offering DSS, Dynamic Spectrum Sharing, where they can. DSS means 5G and 4G/3G networks can share bandwidth on demand and is intended to help speed up network expansion and deepen coverage. AT&T is the 3rd largest U.S. telecom provider with about 92 million users and more attractive than ever. The recent spin-off of Warner Media got a monkey off the company's back so it can focus on its core business. AT&T is another great dividend payer with a yield of over 5.0%. The bad news is the dividend was cut in 2022 following the Warner spin-off but we don't see a trend developing. Other than this one cut, AT&T hasn't cut its dividend since the 1990s and can be expected to increase the payout in the future.

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T-Mobile Is The Best Choice In 5G Networking

T-Mobile (NASDAQ: TMUS) and Sprint made big news when the two merged. The combined companies have over 108 million subscribers making it the 2nd largest U.S. cellular provider by user count. When it comes to 5G this company has, by far, the best strategy and it shows in their service. Instead of building a high or low band network, T-Mobile is building out low, medium, and high band capability within the network for the most thorough coverage possible. The real upside, however, is that T-Mobile has the most coverage at over 53% of the U.S. and it reached that goal well ahead of its initial targets. The Sprint merger is fundamental to the T-Mobile 5G story and not just for the customer base and infrastructure. Before the merger, T-Mobile was working on a higher band 5Ghz network while Spring a lower band 2.5 GHz network. When the merger was completed all of Sprint's customers were migrated to the T-Mobile network and the Sprint 5G network was shut down. Since then, the company incorporated the Sprint infrastructure into the T-Mobile network giving it the best of both worlds.

5G Infrastructure Is More Than Just Mobile Carriers

Telefonaktiebolaget LM Ericsson AKA Ericsson

Ericsson (NASDAQ: ERIC) is a Swedish-based telecommunications company providing software, hardware, and services to telecom providers globally. The company is fundamental to the global telecommunications industry and centrally positioned when it comes to 5G and the upgrade of existing networks to 5G. The company has been issuing 5G software, hardware, and services since shortly after the standard was announced and it is a leading operator in this regard. Along with the infrastructure side, Ericsson is also exposed to the device-end of the business. The company doesn't manufacture its own phones but gets a 5% royalty fee for all Ericsson-branded phones sold worldwide. Ericsson hit a milestone early in the development of 5G, demonstrating the successful use of C-band transmissions to power a 5G network with 16-layer downlink multi-user MIMO tech. This is noteworthy because the C-band is a mid-band spectrum that provides better coverage and capacity than high or low-band networks. During the test, the network hit 5.4 Gbps and set "high expectations for mid-band 5G deployment" in the U.S. That's why AT&T chose the company to help it with its network roll-out.

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