Smart Trends: 5G Will Be Good (and Bad) for These Companies

2020-07-08     thesmartinvestor
Smart Trends: 5G Will Be Good (and Bad) for These Companies

Imagine this — you are rushing home to catch a live soccer match, but you get stuck in a traffic jam. With a sigh of resignation, you turn to your smartphone; but alas, the 4G network is simply too slow to stream a live football match.

You end up missing the important game, much to your regret.

Slow speeds, though, could be a thing of the past as Singapore gears up for the next generation ultra-fast 5G networks.

Living in a connected world

Advanced 5G technologies promise surfing speeds 20 times faster than current 4G networks, and the ability to connect to 1,000 times as many devices that are 5G-enabled.

The implications are far-reaching — with significantly better connectivity, businesses and households can make use of the Internet of Things (IoT), where devices are remotely connected to one another through high-speed networks and which enable them to communicate effectively.

Think driverless cars, smart cities and live monitoring of one’s health — these can be a reality once 5G connectivity goes “live” in Singapore.

The 5G licenses

The Infocomm Media Development Agency (IMDA) has opened up four 5G licenses for the telecommunication companies (telcos) here.

Two of these are for the extensive operation of a 5G network (along with new infrastructure, towers and related equipment), while the other two are smaller 5G networks that provide spot coverage.

Singapore’s largest telco Singapore Telecommunications Limited (SGX: Z74) and newcomer TPG Telecom submitted solo bids for a license, while Starhub (SGX: CC3) has teamed up with M1 in a joint bid. M1 is majority-owned by Keppel Corporation Limited (SGX : BN4) and Singapore Press Holdings Limited (SGX: T39).

IMDA will award the spectrum by mid-2020, and it is expected that at least half of Singapore will have 5G coverage by the end of 2022.

The need for spending

The most directly affected are, of course, the telcos themselves.

A significant sum of money is needed to build out 5G networks, as the Government does not want the telcos to “piggy-back” on the ageing infrastructure currently serving 4G networks.

This implies that the two listed telcos here — Singtel and Starhub, may have to cough up significant sums for capital expenditure (capex) should they win the licenses.

Singtel’s CEO Chua Sock Koong had, in the middle of last year, commented that management was not in a position to speculate on what the capex could be.

Analysts, however, have speculated that it could run into the hundreds of millions of dollars. Whatever the final amount, it may put a significant strain on telcos’ finances and their ability to pay out dividends in the next couple of years.

Fibre network operator

The owner and operator of Singapore’s next-generation nationwide broadband network (NBN), NetLink NBN Trust (SGX: CJLU), stands to benefit from 5G implementation.

As more and more homes are connected to the broadband network, NetLink NBN Trust needs to grow through non-building address points (NBAP). These NBAP are located on street structures such as a lamp post, for instance, and allow devices to send and receive signals.

Once the 5G network is up, there will be a requirement for significantly more NBAP in order for IoT to work properly, and to realize our vision of becoming a smart, interconnected city.

Beneficiaries of IoT

With the rapid proliferation of 5G networks, electronic sensors and components will be needed in order for devices to be able to talk to one another.

This demand will drive up orders from electronic-related companies such as Micro-Mechanics (Holdings) Ltd (SGX: 5DD) and Valuetronics Holdings Limited (SGX: BN2). The former manufactures parts used in wafer-fabrication and assembly processes for the semiconductor industry, while the latter is an original equipment manufacturer for industries such as smart LED lighting and vehicles.

With autonomous driving being a goal for the future, this requires a whole range of sensors and equipment in order for the vehicle to detect its spatial surroundings in real-time.

The leader in electronics manufacturing for many global clients is none other than Venture Corporation Ltd (SGX: V03). This blue-chip stock may benefit from many more years of steady, growing demand for its products and services.

Singapore Technologies Engineering Ltd (SGX: S63) will benefit as its electronics division handles IoT solutions, helping cities to manage multiple municipal services and applications on a common platform, as well as enabling data exchange and smart analytics to provide better insights to urban planners.

Get Smart: Broad-ranging implications

The future of 5G is exciting and has broad-ranging implications for many industries.

Some of these are already known as the trial had been run for 5G applications as far back as 2018, but as 5G itself develops into an industry standard, there will be many more exciting developments waiting to be tapped on and discovered.

Companies that are able to piggyback on the successful implementation of 5G will enjoy strong growth for many years to come.

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Disclaimer: Royston Yang owns shares in NetLink NBN Trust.

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