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Telcos Lost the 4G Battle – and Could Lose the 5G War


Over the last few months here in Smart Money, I’ve been closely examining one particularly abnormally powerful trend and have been highlighting specific ways to invest in it.

5G digital hologram floating over a phone on a city background. representing 5g stocks investing for the next decade
Source: Fit Ztudio / Shutterstock.com

This megatrend is still early in their development, which means that it is still offering some early-stage investment opportunities. That said, some of the best opportunities have left the station already… and most of the others won’t be far behind.

The megatrend that has captured my attention is the global 5G rollout.

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With each passing day, it is becoming more obvious that the 5G rollout is surging from a trickle to a torrent… and starting to gush profit growth for well-positioned companies.

Based on recent estimates from industry sources, 5G networks will generate a whopping $56 trillion in global sales activity by 2050. For example:

  • Artificial intelligence is on pace to unlock over $30 trillion in new revenue.
  • The Internet of Things is going to add $19 trillion to the economy.
  • And driverless cars are predicted to add $7 trillion.

You get the idea. Typically, an industry measures its growth potential in the billions of dollars, not trillions.

And I can assure you, these new technologies won’t produce their tens of trillions of dollars of economic growth in a vacuum. Somebody will be there to collect. In fact, some of the companies I’ve recommended are starting to collect already.

Today, let’s take a look at one of those.

But first, let’s take a look at some companies that could come out behind due to the 5G revolution…

A Clash of Cultures

You’ll notice that none of the companies I’ve shown you here are the traditional telcos, like AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), or SK Telecom Co. (NYSE:SKM), that will operate the 5G networks.

For why that is, think back to a around a decade ago, when 4G networks were rolling out.

Like 5G will in the near future, 4G enabled hugely innovative technologies… and produced tremendous amounts of profits.

But the telcos got almost none of that. For them, 4G was a cost, not a profit center.

As Bloomberg put it in an article from earlier this week:

Mobile carriers poured billions of dollars into high-speed 4G networks only to see technology giants such as Apple Inc., Facebook Inc. and Google walk away with most of the profits fueled by social media.

According to that Bloomberg piece, the mobile carriers again are plowing more billions into 5G. But this time they are hoping to come out ahead — and they’re betting on a “futuristic concept” that sounds a bit laughable to me.

Telecommunications companies are looking to build a platform based on the metaverse, an idea that inspired Ready Player One and online games by market darlings such as Roblox Corp. Early-stage examples include virtual and augmented reality headsets or glasses that provide immersive experiences. Advanced versions — still years away pending super-fast wireless data speeds — combine multiple technologies like holograms to bring the internet to life: 3D avatars of people working, interacting and relaxing in digital replicas of offices, factories and leisure venues.

Recognizing the business potential, telcos… are jumping into the fray — alongside online-game developers — to build a “killer app” that could resemble a blend of today’s social media and e-commerce, but on steroids. Operators could earn a third more in revenue, potentially reaching $712 billion by 2030, if they introduce such innovative 5G applications on top of just laying pipes.

I’m not sure what that all means, but they sound like great ideas — and maybe true moneymakers — for a video game developer… or a Hollywood studio… or a social media or ecommerce company.

If we’ve learned anything over the past few years, it’s that telcos don’t make for great media companies.

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Consider AT&T’s recent unwinding of its WarnerMedia acquisition by merging the assets with Discovery Communications Inc. (NASDAQ:DISCA). Similarly, Verizon recently got rid of its HuffPost and Yahoo/AOL divisions, and T-Mobile (NASDAQ:TMUS) discontinued its TVision streaming service.

After all, despite mobile networks’ and cable’s proximity to the media world, telcos are still essentially utilities. The cultures are too different.

As Bloomberg noted, tech companies like Apple Inc. (NASDAQ:AAPL), Facebook Inc. (NASDAQ:FB), and Alphabet Inc. (NASDAQ:GOOG, NASDAQ:GOOGL) — and I would add Netflix Inc. (NASDAQ:NFLX) and Amazon.com Inc. (NASDAQ:AMZN) to that list, among others — walked away with the lion’s share of 4G profits.

Not telcos.

Now, it’s too soon to predict the next Facebook or the next Netflix — which companies will benefit the most from 5G once it’s up and running.

But this opportunity is still in its infancy, which means it we can profit from the companies building the 5G networks right now.

I’m talking about the companies that are “laying the track” for this America’s next great telecommunications infrastructure improvement…

Hitch on to a $56 Trillion Ride

Specifically, I’m thinking of a little-known play on the coming 5G technology boom, which could generate $56 trillion in global sales activity by 2050.

It is a leading global provider of microwave networking solutions that enable communications networks to handle multigigabit data flows.

Specifically, it provides equipment that high-speed wireless “backhaul links” use to transmit large volumes of data to more centralized nodes for processing and routing, as well as the modular switch hardware those nodes require.

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In other words, it provides exactly what 5G networks need in order to transmit and route large amounts of data quickly.

In this 5G boom, this company has added 50 new customers during the last 12 months. And in dollar terms, the company’s order backlog has swelled to more than 25%.

These new contracts should help power continuing earnings growth, like what the company has been delivering over the last few quarters.

I agree with that assessment. Prepare to be surprised by this company.

The 5G era is here, and this is one of the companies that will capitalize on it.

If you want to learn more about this opportunity and the strategies that can get you ready to take on the 5G revolution, join me for the Tech Supercycle Summit, my latest big FREE event, with legendary investor Louis Navellier.

Check it out by going here.


Eric Fry

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NOTE: On the date of publication, Eric Fry did not own either directly or indirectly any positions in the securities mentioned in this article.

Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, right here.

Article printed from InvestorPlace Media, https://investorplace.com/2021/08/telcos-lost-the-4g-battle-and-could-lose-the-5g-war/.

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