Research firm Gartner said that the potential of 5G has been paid attention to by global investors, and it is expected that revenue from 5G wireless network infrastructure will reach $8.1 billion by 2020. This is an increase of 96% compared to 2019.
As COVID-19 continues its destructive path, many countries and regions around the world see 5G expansion as a way to achieve economic recovery and growth. As a result, the government, private companies and investors are lining up to make the necessary investments to advance the infrastructure required for 5G.
5G was once considered a long-term development, and it is in the most needed period. A 2020 report by McKinsey shows that so-called “pioneer countries” including the United States, Japan, South Korea and China have deployed “the first high-band 5G networks”
For these reasons, we think it’s time to take advantage of this growing but undervalued trend. From the infrastructure that powers the network to equipment and retail service providers, continuously evolving its product suite to take advantage of its enhanced features, 5G is expected to have a significant impact throughout its entire supply chain.
As the development momentum of 5G continues to increase, investors can now use the following methods:
Most of the current investment interest in 5G is focused on cellular communication towers. These macro towers are still the most cost-effective way to deploy wireless spectrum and are in short supply in many areas.
In the United States, there are approximately 150,000 towers, of which approximately 95% are owned by private operators. In Europe, there are approximately 350,000 towers and only 20% are privately owned. Morgan Stanley said that by 2025, the number of towers in Europe is expected to grow to 450,000. However, many countries have a lower starting point. Research by JP Morgan Chase estimates that Mexico has only 33,000 and Brazil has only 61,000.
We believe that cellular towers are the most attractive means to take full advantage of 5G. First, 5G requires more towers to operate effectively, and given the cost and complexity of site selection, construction and upgrade of towers and other infrastructure, barriers to entry are high. However, once the infrastructure is established, operating costs will be relatively low, and the tower will have a long service life. We also appreciate the potential resilience of communications infrastructure because it is less relevant and less volatile than certain other asset classes.
Most private tower operators trade on the stock market and have different investment methods. If you are looking for a more mature American company, Crown Castle International CCI,
And the American Tower AMT,
The American Tower also provides international visibility, which can bring substantial dividends and stable growth.
In order to achieve higher growth, Cellnex Telecom CLNX headquartered in Spain
Continue to purchase and consolidate tower portfolios in Europe, including recent acquisitions in Poland. Cellnex has outperformed the stock market in the past two years and has the opportunity to privatize in Europe, but there is still room for growth.
Equipment operators and manufacturers will also surpass cellular tower companies and further enter the supply chain, and are also preparing to take advantage of the 5G boom. Semiconductors will be an indispensable part of the transition to 5G, such as Broadcom AVGO,
And Samsung Electronics 005930,
Chip manufacturers for cell phones and other mobile devices will become leaders in this field.
In addition to improving mobile and remote capabilities, the latest 5G capabilities will also be used to build and/or renovate offices, apartment buildings and public facilities such as airports and public transportation. Equipment suppliers, such as Nokia NOK,
Companies with a strong foothold in this field should expand their market share.
The biggest beneficiaries of the 5G evolution will be service providers and equipment manufacturers. These providers and equipment manufacturers will promote and create the technologies that we use as consumers every day. In recent years, due to high prices and limited progress, consumers’ motivation to buy the latest models of mobile phones has weakened, but the new models with 5G compatibility will be Apple AAPL,
Samsung Electronics and Samsung Electronics, the world’s two largest mobile phone manufacturers, have good reasons to attract existing customers to upgrade their equipment.
At the same time, consumers will tend to buy high-priced data plans that include 5G. We have seen this trend in Asia, where service providers have increased the average revenue per unit of high-data 5G plans by 30%.
In the United States, the three major US providers-Verizon VZ,
And AT&T T
-Efforts are being made to ensure the fastest and most reliable network.
We believe that T-Mobile has the most attractive value and is in the best position to win market share. After the merger with Sprint, T-Mobile has an extensive wireless spectrum and is expected to have a strong 5G network.
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Josh Duitz is the senior portfolio manager of Aberdeen Standard Investments and the co-manager of the Aberdeen Standard Global Infrastructure Income Fund
Among all his funds, he holds shares in Apple, Crown International Castle, Cellnex Telecom, American Tower, Broadcom, Samsung Electronics, Nokia and T-Mobile.