Rapid changes in the digital era have put software development on the C-suite radar. A look at why streamlined approaches to software development could be the key to unlocking business productivity—and investor interest—in the years ahead.
Morgan Stanley's thought leaders share insights on the latest industry trends covered at this year's Tech, Media & Telecom conference in San Francisco.
Wireless providers will spend big to deploy 5G, but they also stand to gain new markets, revive pricing power and reap rewards that should excite global investors.
The promise of faster and more reliable connections has driven consumer anticipation for fifth-generation mobile networks, or 5G, but for wireless providers and investors, the technology could drive significantly more than a speed upgrade.
Although 5G will take longer to reach maturity, the technology will emerge as the most important value driver for the wireless industry over the next decade.
Indeed, 5G stands to revolutionize global mobile telecommunications. It will open an assortment of new use cases and markets, drive major changes in market structure and create a new paradigm for pricing. For telecoms in leading markets, such as China, the U.S., Korea and Japan, these themes will emerge as the main share-price drivers over the next decade—a good deal of which isn’t yet priced into valuations.
In a recent report from Morgan Stanley Research, a collection of the firm’s telecoms strategists move past the headlines and take a deep dive on the impact of 5G on telecoms and share prices. They estimate that the game-changing network could generate incremental annual revenue of $156 billion from seven 5G use cases over the next decade—40% of current mobile service revenue.
Although 5G will take longer to reach maturity than previous cycles, the technology will emerge as the most important value driver for the wireless industry over the next decade. Here are some key issues for the industry.
Building the 5G Network
First, there’s the issue of how much global telcos will spend to build the 5G network. The report’s lead author, equity analyst Gary Yu, forecasts capital expenditures of $872 billion through 2030, 1.7 times the cost of building out 4G. The high cost of acquiring spectrum—a scarce global resource—is a key part of these costs because 5G needs new spectrum across different frequencies to operate effectively.
Another potential change from 4G to 5G is that China, the world's biggest telecom market, will change from a follower to a leader in this cycle, rolling out its 5G network together with traditional leaders the U.S., Japan and Korea,” says Yu. Although the synchronized rollout could help to lower initial 5G equipment pricing through scale, Morgan Stanley estimates China’s 5G capex at around $421 billion over the next decade which could initially drag down return on invested capital and become a negative catalyst for telecom shares.
In other regions, the lift could be lighter. The report adds that in the U.S., the Big 4 carriers could spend $26 billion on spectrum purchases over the next three years, along with total 5G capex of $265 billion. The report also forecasts $129 billion in Japan and $58 billion in Korea over the next decade.