There are cynics aplenty, but 5G will be to 4G, what the first iterations of broadband internet were to communication by carrier pigeon. A new phase in the tech cycle is about to begin. Investors who back winners will do very nicely indeed, thank you very much.
5G is an outstanding opportunity for investors
The world’s biggest company went close to bankruptcy ten years before it changed the world.
It was 1997, so bad had things got, that Apple called upon Bill Gates, whose voice was heard echoing across one of those glitzy PR spectaculars, for help. It seemed that Apple was resigning itself to a future with Microsoft. At the same event, the company announced the return of the prodigal son — Steve Jobs. At around 60 cents, shares were less than a quarter of the then all‐time high. Market cap was three billion or so dollars.
Ten years later, Steve Jobs revealed the iPhone to the world.
The thing about the iPhone that is too easily forgotten, is that it would have been impossible a few years earlier. Without 2G, then 3G, it wouldn’t have been nearly so attractive. 4G, gave it another boost. Without these technologies, which Apple so ably built upon, it would never have been worth a fraction of its current trillion‐dollar market cap.
Sure, the iPod had saved the company from ignominy, but it was 3G and 4G that catapulted it into the rarefied air of one of the biggest companies (after allowing for inflation) ever.
But 3G and 4G did the same for Alphabet, Amazon and Facebook, and ditto for Tencent and Alibaba.
As I write, the four biggest tech companies in the world are worth just shy of $4 trillion dollars. Before 3G, it would have taken dozens of techs to create a company worth a trillion dollars. Without IBM and Microsoft, it would have taken hundreds of techs.
Thanks to 3G and 4G the tech industry became perhaps a zero bigger. I predict the same thing for 5G.
Not all agree. The Wall Street Journal recently quoted William Webb, a former director of strategy at Motorola saying: “5G doesn’t bring anything I can imagine that you can’t do with 4G” and goes on to compare 5G with Concorde.
But Mr Webb is in a small minority. What we can say for sure is that 5G will be a lot faster than 4G. How much faster depends — 4G itself varies in speed, but it seems a ten‐fold increase in speed will become common within a few years. Nokia maintains that it has managed to achieve speeds of 10Gbps — whilst the fastest speed for 4G in the UK, EE’s LTEA network, is around 300Mbps. So that’s actually 33 times quicker, in theory.
What 5G will do is open up new possibilities— machine to machine communication will increase enormously, transforming the prospects for autonomous cars, for example.
Who will the winners be?
I would like to say BT, but at the end of last year, the outgoing BT boss, Gavin Patterson, said: “I talk to other CEOs around the world... and we’ve all been struggling a little bit to make the business case work.”
I wasn’t impressed by that.
The history of disruption is littered with the corpses of companies that said some new tech was overhyped — or they couldn’t make a business case.
The obvious candidates to become winners are the giant techs. You might think that a valuation in excess of half a trillion dollars, or even a trillion dollars, would suggest little room to grow into. But I don’t agree. The technologies that 5G will help advance will contribute trillions of dollars to the global economy.
Other companies to watch out for include Qualcomm, the semiconductors and telecommunication equipment company. It has been active in this space and is nicely poised for the revolution that is set to occur.
You may find this one surprising, but Nokia is looking interesting too. Sure, the way it lost its dominance of the mobile phone market is a classic example of disruption. These days, the Finnish company specialises in network and IP infrastructure, software and technology licensing. It merged with Alcatel Lucent, has invested heavily in 5G Future X architecture, and has been engaged in a fruitful relationship with China Mobile.
Vodafone may be worth a look too, this company offers the best of both worlds, an impressive dividend and growth potential thanks to investments into 5G.
Also look at Cisco, and in the UK, O2, owned by Telefónica, has done well from the latest 5G spectrum auction.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees