5G and the Wireless Future

Past and Future

As one develops an investment strategy, it's important to not only consider what has worked in the past but what might work in the future regarding investment assets. There is no doubt that the future will look different than the last 10 years and will include new areas of economy expansion including green energy, increased technology integration, and wireless connectivity.

At DWM we consistently review industries that we believe will provide future opportunity and adjust portfolio strategies accordingly. Remember, some of these themes may not be reflected in currently held individual positions but instead contained within diversified assets in portfolios.

Tailwind Industries

The pursuit of assets participating in tailwind¹ industries allows us to position portfolios for the future while assuring we are anchored in portfolio strategies that have worked in the past. This includes dividend-oriented assets as well as high cash flow companies with predictable future cash flow.

As an example, the announced auction winners for 5G spectrum band licenses this past Wednesday shows that there is a demand from wireless companies to pursue pathways to deliver faster wireless solutions to companies and individuals. This is an example of a tailwind theme that we believe will play out over the next 10 years.

A recent CNBC article outlined this auction process and the huge dollars bid.

¹A tailwind refers to a certain situation or condition that may lead to higher profits, revenue, or growth.

***

Begin Quote

On Wednesday, the Federal Communications Commission announced the winners of an $81 billion auction for the license to use important airwaves that are ideal for 5G.

The big winners were Verizon and AT&T. They need these airwaves in order to build 5G networks, which are significantly faster than current wireless service.

Verizon, through its Cellco Partnership subsidiary, bid nearly $45.5 billion on the airwaves. AT&T, through AT&T Spectrum Frontiers, bid $23.4 billion. The third-largest U.S. carrier, T-Mobile, bid the third-largest amount of money, $9.3 billion.

The sums spent by the companies ended up much higher than expectations for the auction last summer, which reflects how important securing licenses for the airwaves is for the carriers.

“These record-breaking results highlight the demand and critical need for more licensed mid-band spectrum and demonstrate the importance of developing a robust spectrum auction pipeline,” said CTIA CEO Meredith Baker in a statement. CTIA is a trade group that represents the wireless industry. Bidders are still under a quiet period, when they are not permitted to publicly comment.

The 280 megahertz of spectrum up for grabs in this auction is midband spectrum, sometimes called the “goldilocks band,” which means that it’s well-suited for 5G networks, combining the ability to transmit huge amounts of data with a wavelength that can travel long distances.

The results are in line with previous industry expectations. Verizon and AT&T were expected to be the biggest bidders, because they did not have a lot of midband spectrum. T-Mobile had already acquired some midband through its merger with Sprint.

End Quote

***

Source: CNBC.com, Verizon is the top bidder on 5G spectrum, committing more than $45 billion 
https://www.cnbc.com/2021/02/24/verizon-commits-more-than-45-billion-to-5g-spectrum-bid.html 

A Balanced View

We continue to position portfolios in a way that we believe makes sense in today’s rapidly changing investment landscape. We look at potential downside pressure AND potential upside opportunity. This dual perspective impacts every investment decision that we make as we manage portfolio strategies as a fiduciary. We will continue on this path.