By Joshua Kaplan, CFA, Global Head of Research, MV Index Solutions
The Coronavirus pandemic is fundamentally shifting our behaviors as consumers and workers alike, and the investment insights/implications are dramatic. I don’t have to tell you this as I know you’re experiencing it along with me, in real time, on a daily basis. From remote work connectivity to more time spent streaming media content and playing video games, we have all undoubtedly experienced the frustration of sub-optimal network connections and service that just can’t keep up with our growing demands.
As investors, these moments, replicated in households across the world, create a multitude of new investment paradigms. And while the opportunities are many, one thing is for sure: the impetuous for network operators to accelerate the roll-out of the fifth generation of mobile networks, “5G”, has never been stronger, as it underpins them all.
We can track, even prior to the global pandemic, how use of mobile data through the use of today’s most popular applications had put a strain on our 4G networks and the core systems. Adding to the need for network upgrades are the many industries that are still in the early adoption phase but simply will never materialize without 5G networks: Industrial IoT, smart infrastructure, autonomous driving, and cloud-based AI to name just a few.
Imagine a seamlessly connected world that operates 50x faster than our current 4G environment with virtually zero latency; this dream is almost a reality. The planning for 5G network technology began many years ago but only started to take shape in 2017 when operators in 49 countries completed 5G network trials. The first commercial 5G deployment came in 2018 and in 2019 South Korea became the first country to begin countrywide 5G network deployment.
This year, 5G deployment began in major cities in countries around the world. While the roll out of 5G networks is happening before our eyes, the build-out of 5G networks, let alone commercial deployments, is still in the very early stages.
The demand for the equipment and software that meet 5G standards is only set to continue as more developed and major emerging countries look to move from regional to national 5G rollouts. For the mobile network operators themselves, the current capex spend is expected to pay massive dividends in the future as 5G will allow network operators to offer higher value-added services including private 5G networks for industrial use, and to compete in cloud computing services. In the US alone, wireless network operators are estimated to increase CAPEX spending by 11% in 2021 to around $35 billion US. Globally, the 5G services market is estimated to be $48 billion USD in 2020 and is expected to grow at a CAGR of nearly 44% through 2027.
There is no chicken or egg quandary when it comes to this next step in the global innovation cycle. The connected world of tomorrow that we read and dream about today is intrinsically dependent on the roll-out of 5G, the foundation for the next wave of global technology innovation.
BlueStar 5G Communications Index
08/31/2019-08/31/2020Source: MV Index Solutions. Data as of 31/08/2020.
About the Author:
Joshua Kaplan is the Director of Research and Finance at BlueStar Indexes. Joshua leads BlueStar’s index design, maintenance and commercialization activities. He is also responsible for producing research and analysis on BlueStar’s indexes as well as Israel’s economy and capital markets. Prior to joining BlueStar in late 2011, Joshua specialized in fundamental equity analysis for an Israel-focused hedge fund which was an affiliate of a leading Israeli private equity fund. Joshua is a CFA Charterholder, holds the FINRA Series 7 Securities License and is a Registered Representative in the States of New York, New Jersey, and Florida. Joshua graduated from Syracuse University with degrees in Finance, Entrepreneurship, and Economics. Josh Kaplan is a registered representative of ETFMG Financial LLC.
The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.