The Scottish Mail on Sunday

How 5G can give your portfolio a dazzling future


ALTHOUGH it may take a while to spread its tentacles fully into our lives, make no mistake, the introducti­on of state-of-the-art 5G mobile network technology is going to be transforma­tive. Maybe, some say, as dramatic as the birth of the internet itself.

Yes, there will be hype and hiccups along the way – and internatio­nal politics will occasional­ly disrupt matters (think no further than Chinese 5G specialist Huawei) – but 5G is coming into our lives and, in time, we will embrace it as enthusiast­ically as we have done the world wide web.

By 2024, it is expected that some 40 per cent of the world’s population will have 5G coverage.

Thanks to 5G, consumers will be able to download more content at greater speed – the latest blockbuste­r film for example.

Just think about these statistics. Using 3G, it takes more than nine minutes to download a high definition movie (I remember it well). With 4G, it takes just over 30 seconds. But when you get 5G, it will take a second. Yes, a second...the blink of an eye.

Also, with 5G, we will be assured of more reliable connectivi­ty, so in my case no more frustratin­g half-times at football matches unsuccessf­ully trying to log on to BBC Sport to catch up on the latest scores elsewhere.

And we will have the opportunit­y to have more gadgets ultimately controlled by our phone. Everything from smart meters (boo, I hear you say) through to home security sensors and robot mowers that on our command cut our lawn. Yes, welcome to the ‘internet of things’.

Yet 5G’s transforma­tive impact will go way beyond the home. It’ll speed up the march towards widespread industrial automation – artificial intelligen­ce – and one day result in driverless trucks or ‘truck-trains’ going up and down our motorways (at least, they won’t suddenly veer out in front of you as many bored lorry drivers like to do with smiles on their faces).

It will also impact on medicine and healthcare provision.

As Borg Ekholm, chief executive of Swedish telecoms giant Ericsson, recently said: ‘No previous generation of mobile technology has had the potential to drive economic growth in the way that 5G promises.

‘It goes beyond connecting people, to the possibilit­y of making the internet of things and the fourth industrial revolution a reality.’

Powerful words, eh, although they were made not without vested interest. Mr Ekholm is the head of a company at the forefront of building 5G networks – here and worldwide. And for every Mr Ekholm, there is another expert who believes the 5G story is overhyped and will take much longer (a decade or more) to take hold. Yet the fact remains that 5G is the future. And for those who want to build longterm wealth, the 5G story is a theme they may want to embrace within their investment portfolio.

In time, many listed companies will make big profits from this mobile revolution, which in theory should result in strong relative share price performanc­e and – in some cases – attractive dividend payments. ‘The new era of hyperconne­ctivity that is upon us provides investors with a long list of potential stock market winners,’ says Russ Mould, investment director at AJ Bell.

‘These range from 5G network equipment suppliers and their subsupplie­rs to mobile network operators, smart device makers, media companies that provide streaming services and video gaming specialist­s.’ But he overlays his enthusiasm for 5G with a big dollop of caution. He adds: ‘A good narrative – and 5G is a good narrative – does not always make for a good investment, especially if you buy at the wrong time.

‘The technology, media and telecoms bubble of 1998 through to early 2000 had some of its origins in expectatio­ns for the roll-out of 3G technology.

‘The 3G switch took longer to gain traction than expected, leaving many firms exposed to earnings disappoint­ment. As a result, their share prices collapsed when the tech bubble burst in early 2000. Investors in the 5G investment “story” need to ensure they are paying a sensible price for any shares and are not just piling in blindly. A long-term view is also required.’ Wise words.


IN THE United States (where else), the first 5G-focused investment

fund – FIVG – has been launched to invest in US-listed companies involved in the developmen­t and roll-out of 5G networks.

Although the fund is not available to UK investors, its portfolio gives an indication of the breadth of companies with a toe or three in the 5G camp.

It includes mobile network providers, manufactur­ers of network equipment such as cell towers (that beam 5G signals wirelessly across the landscape using radio waves), antennae and routers, companies specialisi­ng in the storage of data, and manufactur­ers of the chips that in big part make smartphone­s do all the wonderful things they can do.

Among the fund’s top holdings are familiar corporate brands – Finnish-based Nokia and Ericsson, whose shares are respective­ly listed on the New York Stock Exchange and Nasdaq.

Both are big 5G players, providing equipment that will help build 5G networks worldwide – alongside other corporate giants such as South Korea-based Samsung and, yes, China’s Huawei.

Other holdings include cellphone tower operator American Tower, semi-conductor maker Qualcomm, 5G technology specialist Xilinx, and mobile service providers AT&T and T-Mobile.

Apple, at some stage expected to launch 5G smartphone­s, is also part of the FIVG portfolio, as is Amazon, which could be one of the beneficiar­ies of increased demand from mobile users for films and TV programmes to watch.

Many of the companies making up FIVG are held by investment funds and investment trusts available to UK investors. Most of these funds have a technology or American bent (see box, left).


FOR UK investors, the choice of 5G-involved companies listed on the London Stock Exchange is more limited than is available in the United States. Vodafone and BT (owner of mobile network operator EE) are probably the most high profile and obvious choices, having already launched limited 5G services.

AJ Bell’s Mould says both companies will look to boost mobile phone usage on the back of 5G – for example, as customers use their mobiles to view greater video-rich content. Yet, so far, the 5G journey has not been an easy one for either company.

Last year, Vodafone was forced to cut its dividend, in part to divert cash to build its 5G network.

Also, a few days ago, it said Government restrictio­ns on the use of Huawei equipment in the building of the country’s 5G’s network – imposed because of security fears – would result in extra costs. These stem from replacing existing Huawei

equipment to keep within the new limits – for example, antennae and base stations that transmit data across the country’s 5G network and software and hardware used to process and store data.

BT also said it would be hit with a £500million bill as a result of complying with the new Government rules. Alternativ­e equipment will have to be bought from the likes of Nokia and Ericsson – and any new competitor­s that emerge in the near future.

Despite these knockbacks, Jason Hollands, of wealth manager Tilney, still believes the eventual universal roll-out of 5G will provide a ‘boost’ to both BT and Vodafone.

Other UK-listed companies that could do well include 5G equipment testing specialist Spirent Communicat­ions, that forms part of the FTSE 250 Index. Mould says Spirent is a potential ‘winner’ although its shares have already risen sharply – some 129 per cent over the past two years alone. Warns Mould: ‘There could be lumps and bumps along the road.’

Other slightly more left-field winners include Centrica (owner of British Gas) and traffic flow manager Tracsis, part of the FTSE AIM All-Share Index. Says Mould: ‘Centrica will be looking to use the internet of things to offer customers smart meter-based monitoring and related services. Leeds-based Tracsis will be able to use 5G to provide remote and automated safety monitoring – on the roads and at big sporting events.’

Keywords Studios, a provider of technical services to video gaming companies, should also do well on the back of an anticipate­d mobile phone boom in use of video games triggered by 5G. Like Tracsis, it is an AIM stock.


STEVE Marshall is a former senior executive of American Tower Corporatio­n, a company that owns a lot of the infrastruc­ture essential for 5G to work – for example, wireless towers and antennae systems. He is chairman of UK fibre network provider NextGenAcc­ess, a company helping the country get fit for 5G purpose.

He has no doubt that 5G will transform the way consumers live and businesses operate. He sees a future where we will be able to enjoy broadband ‘on steroids’.

When that happens, he says it will truly transform business and bring widespread automation a giant step closer – the driverless trucks already mentioned and even pre-programmed wheelchair­s at airports that will enable travellers needing one to be taken off a plane and then transporte­d to the terminal without requiring the assistance of loads of airport staff.

The 5G revolution has just begun. At the very least, think about it in your long-term investment planning. But don’t get too carried away – remember March 2000, the bursting of the first tech bubble.

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