Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 293

5G is coming: who wins and who loses?

It’s regarded as the future of mobile, but a recent research trip to the US drove home that 5G will be one of the biggest themes of 2019.

Telecommunications companies (‘telcos’) are particularly excited about the implications of 5G for fixed wireless. The offshore companies we spoke to gave useful insights into what we can expect from the big players in our region.

Big speeds, big capacity, big opportunities

Telecommunications giant Verizon plans to use 5G network’s capacity for fixed wireless. When fully operational, the company expects its new 5G network will be 10-20 times faster than with existing 4G technology and carry 10 times more data. It will also be 10-12 times cheaper (on a cost/byte basis) to run.

This speed and cost savings will significantly close the gap between fixed-line and mobile broadband services, and it is likely to result in many subscribers shifting to mobile-only services.

The decline of the fixed line

Verizon’s target is to move 30 million homes in the US (around 25% of its subscriber base) to fixed-wireless services. The company has already stopped investing in fixed-line access, as wireless is set to be more profitable than fixed-network customers. As customers make the switch, Verizon is projecting fixed lines to revert to negative growth within five years.

In Australia, Telstra, Optus and Vodafone (and until recently and now apparently cancelled, TPG Telecom) are building 5G networks.

We believe that Telstra, with around 50% share in both mobile and fixed broadband markets, is well placed to switch some customers from fixed to mobile. Like Verizon, this should be a driver of future earnings, with Telstra’s mobile business earning around 40% EBITDA margin versus a barely profitable NBN business.

Similarly, in New Zealand, Spark New Zealand is targeting approximately 25% of its subscriber base for fixed wireless. As incumbents shift customers onto more-profitable mobile products, competitors such as Optus and Vodafone will follow, with implications for fixed-line operators, such as NBN and Chorus New Zealand.

Cost savings from the cloud

The investments made by telcos into 5G will enable them to shift much of their legacy networks to the cloud, allowing automation of many of the manual processes in older legacy networks. This automation allows greater reliability, less human error and targeted cost reductions.

For example, Verizon is looking to reduce 47,000 positions (around 30% of the workforce) by next year. Telstra has also flagged a labour reduction, targeting 8,000 positions.

Unlike legacy networks, the greater automation employed by next-generation networks will allow telcos to evolve tiered pricing structures for corporate clients. Telcos will monetise the increasing demand for speed and connectivity, rather than becoming ‘dumb pipes’.

Connected to incremental revenue

With the rollout of 4G, smartphone penetration grew rapidly, driving the ‘app economy’. Similarly, the rollout and adoption of 5G, and the greater speed and capacity it offers, are likely to lead to more connected devices and new uses which are yet to be conceived. Think autonomous vehicles, augmented reality, surgery, wearable devices, gaming, smart homes etc.

This is all incremental revenue for a telco as it will leverage the existing infrastructure. Some investment will be required to capture this but, we believe, it will be within the current capex envelope (outside of the spectrum auctions).

The long-term picture

However, this will be a multi-year process. Most telcos will roll out a 5G network in line with customer demand, but customers will wait for 5G-enabled handsets to hit the market.

Samsung and some of the Chinese handset manufacturers are due to launch 5G-enabled devices in the first half of 2019. But it won’t be until Apple releases its 5G handset next year that we will see a consumer shift to 5G, given Apple has a 54% share of the handset market (according to Statista, market share of mobile devices in Australia, year to April 2018).

It is shaping to be a more positive environment for the communications sector over the next few years driven by new technology and new operating models.

 

Patrick Potts is a Research Analyst with Martin Currie Australia, a Legg Mason affiliate. Legg Mason is a sponsor of Cuffelinks. The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the security transactions discussed here were, or will prove to be, profitable. Please consider the appropriateness of this information, in light of your own objectives, financial situation or needs before making any decision.

For more articles and papers from Legg Mason, please click here.

 

6 Comments
Steve
February 16, 2019

Our wireless system at home is just fine. NBN is only just being rolled out in our area.

erko
February 16, 2019

Are there any research studies confirming that 5G technology is not HARMFUL to people and animals?

Rob
February 15, 2021

Get in your compact SUV, go down to Coles, and buy all the tinned food and toilet paper you can with the complete disregard for anyone else or common sense in general. I say this because you will inevitably come back with little bits of information you have picked up here and there which in turn leads to your eagerness to "educate me" on the importance of such topics. 

TomA
February 16, 2019

Chris, apply to Rudd and Conroy for implementing the NBN in the first place. They were warned then that fibre would be usurped by higher speed mobile but they knew better without any comms engineering nouse. Simply driven by the envious smaller retailers who wanted Telstra white anted. So it has come to pass that Telstra will regain its strength through 5G.

MIck McGuire
February 15, 2019

I live in outer environs of a rural community. We struggle with slow speeds. I am led to believe that 5G is worse in this situation in as far as distance from the tower.

Does anyone know?

Chris S
February 14, 2019

We won't be transferring to the NBN, which is now available in our area. Instead, we will let our ADSL die off and just use mobile 4G. We'll upgrade our devices to 5G (fixed and/or mobile) when that becomes available.

Where do i apply to get back the taxes I paid for Abbott & Turnbull's failed multi-technology NBN?

 

Leave a Comment:

RELATED ARTICLES

Who’ll win in our National Broadband Network future?

Are there profits from the 5G revolution?

Telstra: the dominant player in an improving industry

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Latest Updates

Taxation

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

7 key charts on the state of the Australian property market

The Australian property market stirs fierce debate - often bullish optimism versus crash predictions. But beyond the noise, seven charts reveal what's really driving prices and the outlook for residential real estate.

A simple alternative to the $3 million super tax

Division 296 aims to introduce improved fairness into the superannuation system, yet is overly complex. This scours the world for better ideas and suggests a simpler alternative which can achieve the same goals.

CBA and the index conundrum for super funds

After the hyperbolic rise in CBA shares, super funds are floating the idea of carving out the weightings of ASX bank securities and indexing them within their portfolios. This looks at why that might be a big error.

Strategy

10 policies to drive Australian productivity higher

Here's a comprehensive list of proposed reforms to fix Australia's stagnating economy, including introducing a flat income tax rate, reducing migration, and making childcare tax-deductible.

Interviews

Where to find big winners in Asia

As more money looks for a home outside the US, Asia may soon get some love. Fidelity's Anthony Srom outlines the best places in Asia to invest, including in Chinese consumer names, Indian financials, and Thailand.

Investment strategies

We have trouble understanding the time value of money

We overvalue the present and underestimate the future - it’s a cognitive glitch called hyperbolic discounting. It affects savings, spending, and loans, and it's more common - and costly - than we think. 

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.