Don’t Buy '4½G' Stocks If You Want To Make Real Money From 5G

Stephen McBride  |

iStockphoto, Bill Oxford

T-Mobile(TMUS)] just made 5G history. Last Friday, the cell carrier “flipped the switch” to activate America’s first widespread 5G network. T-Mobile’s new 5G network will reportedly cover more than half of all Americans.

This is a big deal. As you probably know by now, 5G is the new superfast cell network that promises to change the world. At up to 100X faster than 4G, its lightning speed will totally change how we use the internet.

Folks have been talking about 5G and hyping it up for years. It’s finally here!

The only problem is, it’s not “real” 5G.

There’s Something T-Mobile Isn’t Telling You

I recently visited a cell phone store to try 5G myself. The sales guy whipped out a brand new 5G phone and downloaded a two-hour high-definition movie in about 10 seconds. This would take at least 15 minutes on 4G.

And downloading a movie in seconds is the least exciting thing about 5G. With 5G, you’ll be able to attend meetings holographically. You’ll be able to nap during your commute as a true self-driving car takes you home from work. Fully robotic factories will practically run themselves.

T-Mobile’s Version of 5G Can’t Do Any of This!

Although T-Mobile’s marketing department calls its net network “5G,” it’s really more like “4½G” because it’s not all that much faster than current 4G networks.

See, T-Mobile’s goal was to be “first” to 5G. To win the 5G race against Verizon [VZ] and AT&T [T], it had to sacrifice a lot.

That’s because 5G has a glaring weakness. Although a true 5G signal is blisteringly fast, it can only travel roughly 1/200 of the distance of a 4G signal. Verizon’s 5G signal in Chicago stretches only about 120 yards.

One tower can’t even cover a single NFL stadium, which is a problem when you’re trying to roll it out across sprawling cities. Short signals make the coverage extremely patchy.

Verizon and rival AT&T are building new mini-cell towers on practically every street corner to make true 5G work. In other words, they’re rolling out their networks block by block.

T-Mobile Is Taking a Different Approach with Its “4½G”

Instead of building a whole new fleet of small towers, it has revamped its existing cell towers with 4½G network gear. These receivers can blast a signal up to 2.5 miles away, which is how T-Mobile reached 5,000 US towns with the flip of a switch. The downside is speeds aren’t much faster than regular 4G.

Now the question is: Will being “first” to 5G help T-Mobile steal customers from other cell companies? Or will Verizon and AT&T’s focus on real 5G be the winning strategy? If I had to rank these “big 3” cell carrier stocks, I’d probably go:

  1. Verizon
  2. T-Mobile
  3. AT&T

Verizon’s slow, methodical buildout of true 5G will take many years, but I expect its 5G network to cover most major US cities in the next 12 months. And Verizon’s customers mostly live in densely packed cities.

With a slew of new 5G smartphones—including the iPhone—hitting the market next year, Verizon’s sales should get a boost. Meanwhile, with its “4½G” strategy, T-Mobile will dominate in rural America.

Sure, it’s just a puffed up 4G. But because the 5G rollout will take years and will focus on cities first, 4½G will be the fastest service available to rural America for a while.

Where Real Money Lies in 5G

But if you want to make real money from 5G today, there are much better stocks to own now. The “big 3”—Verizon, AT&T, and T-Mobile—must shell out billions of dollars to get America 5G ready.

The Federal Communication Commission (FCC), America’s wireless network “overlord,” estimates we’ll need 800,000 “small" cell towers to make 5G a reality.

For perspective, America’s existing network—built over 25 years—has just over 200,000 towers!

Even T-Mobile’s “4½G” tactic requires a revamp of its networks. It built 23,000 towers this year and plans to put up another 20,000 in the next few months.

And building towers is just the tip of the iceberg. Roads must be pulled up to lay underground fiber-optic cables. Existing cell towers have to be refitted with new 5G equipment.

It’s a giant, multi-billion-dollar infrastructure product. The bottom line is the “big 3” cell carriers are footing the bill.

Buy Stocks That Milk the “Big 3”

Why own the companies spending billions on 5G when you can own companies collecting all these billions? I’m talking about firms in the business of building the 5G infrastructure: putting up the 5G towers, selling the 5G networking equipment, providing the 5G hardware.

Cell providers don’t typically own towers. Instead, they rent space on towers built and owned by companies like Crown Castle(CCI)], which builds cell towers across America. It then leases space on its towers to wireless carriers who install their own antennas.

That’s where you want to be invested right now—in businesses that the “big 3”—AT&T, Verizon, and T-Mobile—are throwing heaps of cash at. Remember, we’re slap bang in the middle of the 5G buildout phase. You want to own the stocks profiting from the buildout, not paying for it!

_____

Equities Contributor: Stephen McBride

Source: Equities News

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer. The author of this article, or a firm that employs the author, is a holder of the following securities mentioned in this article : None


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Symbol Name Price Change % Volume
TMUS T-Mobile US Inc. 99.50 -0.99 -0.99 6,350,432 Trade
VZ Verizon Communications Inc. 58.09 -0.13 -0.22 16,748,577 Trade
T AT&T Inc. 38.61 0.17 0.44 27,176,134 Trade
CCI Crown Castle International Corp. (REIT) 166.99 1.39 0.84 2,180,299 Trade

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