Verizon: 5G Technology Is Worth Tens Of Billions

Summary

• Verizon is the first to launch a commercial 5G product in limited areas.
• While Verizon is the first, nationwide 5G is likely only to be available in 2020.
• By 2020, all competitors will have launched their own products, so Verizon’s first-mover advantage is negligible.
• Even still, the new 5G technology introduces two new revenue streams which are potentially worth tens of billions of dollars in revenue.

Thesis

Verizon’s (VZ) 5G has the potential to add tens of billions in revenue to the company. However, competition is intense, and investors shouldn’t lick their fingers just yet.

Introduction

Verizon’s 5G launch has been mentioned a lot, but what exactly is it and how will it eventually benefit shareholders? First, a brief background. As one might probably suspect, 5G is an improvement upon 4G. Verizon is the first company to launch a commercial 5G product. Some key traits of 5G: 1) It allows for residential broadband, 2) 28 gigahertz, and 3) up to a thousand times faster than 4G. On October 1st, Verizon turned on 5G home broadband in four cities. The reason for only turning it on in four cities was due to lack of equipment essentially, according to CFO Matthew Ellis:

So the amount of equipment that we have on the proprietary standard is fairly limited, whether that be the network equipment or the customer premise equipment. So that’s why it’s limited to those four markets and specific geographies within those four markets.

New revenue streams

The new 5G technology is so much more superior than 4G that it can support multiple revenue streams. First, the company can now compete in broadband offerings as its product, 5G home broadband, is essentially broadband without the cable. Of course, 5G is also much faster. Furthermore, the company has plans to offer the product to 30 million households:

“On the residential broadband, we’ve said we see the size of it and it’s really based off where you see the density of homes. And so we certainly still see line of sight to getting to 30 million households in the U.S. with that product over the next few years.” – Seeking Alpha