One of the best ways to determine whether a company is on the right track is to see what its competitors are saying and doing. If you are a Verizon Communications Inc. (VZ) investor, then you must feel real good that DISH Network Corp (DISH) is freaking out about Verizon’s positioning in 5G.
Then, when you dig deeper and realize what 5G could mean for Verizon and VZ stock, you realize it is not all that shocking that DISH is already in panic mode.
What 5G Will Do for Verizon
Until recently, telecom companies like Verizon paid big bucks for blocks of spectrum: crucial components that allow free flow of data on mobile networks.
Dish owns a large block of advanced wireless services spectrum that is essentially unused. Dish — and its shareholders — hopes that a large company like Verizon will come along and buy its spectrum, or lease it for billions per year. However, we have since seen companies migrate towards small cells, and other equipment that has become a cheaper alternative.
That said, DISH stock has lost about 27% of its value over the last year, most of which is tied to the depreciation of its spectrum assets.
Thus, it is no wonder that DISH is lobbying the FCC to prevent Verizon’s $1.8 billion acquisition of XO Communication’s spectrum assets and fiber. DISH claims the move would give VZ exclusive control of key 5G spectrum, but it would also depreciate the value of Dish’s spectrum.
When Verizon offered $1.8 billion to XO Communications, it was sold to shareholders as a move to bolster Verizon’s fiber-optic network in 40 major U.S markets. However, the local multi-point distribution service frequencies that Verizon already has and will acquire in the purchase are reportedly the “next frontier” airwaves for 5G, according to Dish.
Dish goes on to add that such “next frontier” frequencies will be controlled exclusively by Verizon if the purchase goes through, thereby implying that Verizon already has quite a substantial presence in place.
With that said, Verizon has already vowed to be first in the U.S. to deploy 5G, and based on this argument from Dish, it appears that Verizon has built itself quite a substantial lead for some time to come. Furthermore, if it acquires those said assets, its lead could be even greater.
What Does This Mean for VZ Stock?
At the end of the day, Verizon is doing the same thing it did with 4G and doing it with 5G. Verizon was the first to deploy 4G and have nationwide service. While AT&T Inc. (T) has spent billions on infrastructure and deployments like Project VIP, Verizon still maintains the most dense coverage and best overall 4G network due to the lead it built all those years ago.
We have to assume that the same will apply in 5G, despite not knowing exactly what 5G will entail. One thing we do know is that Verizon aims to rollout nationwide broadband services through the launch of its 5G network.
Not too long ago, Verizon demonstrated download speeds of 3.7 gigabytes per second, far faster than the 1 Gbps speeds that Google Fiber boasts. And according to VZ CEO Lowell McAdam, 5G Fixed wireless broadband connections are coming to the home, which means the fastest internet imaginable without any cords or in-home installations.
In other words, VZ will blur the lines of mobile and broadband with 5G.
McAdam says that deploying 5G nationwide is a matter of getting fiber connections close to areas where it is being deployed. Verizon already has the nation’s largest fiber optic network, so when you combine it with XO Communications, which has fiber connections in 45 of the top 50 U.S. markets, it is clear that Verizon has the fiber needed to make 5G work.
Finally, Verizon must pair that fiber with the 60,000 towers nationwide that communicate with wireless and wireline customers.
While it may appear that Dish was only protecting the interest of its spectrum network, it now seems that even Dish’s satellite business could be at stake with a successful launch of 5G. And it’s not just Dish, but also Comcast Corporation (CMCSA), Charter Communications Inc (CHTR) and every big and small company in between.
The fact is that no company can match the speeds or range of Verizon’s 5G network once built, and while AT&T can compete and will certainly capitalize from the opportunity, it is rather obvious that 5G will be even more important than 4G.
As of this writing, Brian Nichols owns shares of VZ.