T-Mobile Fired The First Shot
A few weeks ago T-Mobile (TMUS) fired the first shot in the war for 5G dominance. T-Mobile announced it would be activating the first 5G network in the U.S. setting the stage for the coming battle. The first to be activated does not mean T-Mobile is the only communications company with 5G in the works. AT&T (T) just fired back with news of its own 5G launch, one that is sure to give T-Mobile a run for its money.
The T-Mobile 5G network went live on December 6th along with the first sales of the company’s 5G capable phones. T-Mobile’s first phones are low-band, a mere 600 MHz, and also the slowest in the field of competitors. Even so, T-Mobile says its network will reach 60% of the U.S. and 200,000 more customers. The battle for 5G dominance is going to be fierce.
AT&T Goes Live With 5G For Mobile
AT&T got off to a soft start today by launching its 5G service in 10 markets. Cities include Los Angeles, San Diego, Birmingham, Indianapolis, and Pittsburgh. The Samsung(?) Galaxy Note10+ is now available to consumers nationwide so expect a boost to sales in the coming quarter.
The AT&T 5G network is a “low band” 5G network but still faster than T-Mobile. The low-band network is intended for consumers and available throughout the coverage areas. The faster 5G+ service is built to serve large organizations and high-traffic areas with potentially thousands of connections.
“We believe 5G technology will be game-changing, and we continue to help drive this next wave of innovation,” said Scott Mair, President of AT&T Technology Operations. “We were the first in the U.S. to offer commercial mobile 5G, and this is the next step as we build to nationwide service in the first half of 2020.”
The 5G Market Is Worth Billions, Everyone Will Be A Winner
The global 5G market is in its infancy and already worth $45 billion. Over the next 6+ years analysts are expecting a 56.7% CAGR, a staggering amount no matter how you look at it. This means there is plenty of money for all who participate, everyone will be a winner.
Chip-maker Broadcom has bet-big on 5G and already showing signs the bet will pay off. The company reported earnings last night and delivered a stellar report. The company beat on the top and bottom lines, raised the full-year guidance and reiterated management’s outlook that core-semiconductor sales were bottoming. A return to growth (in core sales) is expected next year.
From the Broadcom press release/earnings call
“We continue to believe that our core semiconductor business is bottoming and will return to year over year growth in the second half of our fiscal year.”
Evidence of the company’s success in other key areas including 5G lies in the dividend. Broadcom increased its dividend by 22.6% and did nothing to hurt the sustainability of the distribution. Free-cash flow is on the rise and the payout ratio is running below 50%. Because this good news was already priced into the stock shares of AVGO fell in today’s trading.
AT&T, The Technical Outlook
Shares of AT&T were little moved by the launch of 5G, likely because it has been long-expected. Even so, the long-term outlook for the stock is bullish and now might be a good time to buy. The Communications Sector has been on the move over the past few months and trading just below the freshly-set all-time high. With earnings growth in the forecast and 5G going live the odds of a break-out to new all-time highs are high. As for AT&T, the stock is range-bound after hitting a one-year high and waiting for something to move it.