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What Are Verizon’s Expectations for the Initial Cost Dynamics of 5G?

Key Updates from Verizon at the Deutsche Bank Conference

(Continued from Prior Part)

Verizon on 5G

During the recent Deutsche Bank Media, Internet & Telecom Conference on March 8, 2016, Fran Shammo, Verizon’s (VZ) executive vice president and CFO, highlighted a key aspect of 5G. Shammo said, “5G is not a replacement of 4G. It is kind of an overlay to your 4G network so all of the fiber we are utilizing for 4G, all of these small cell in building antenna systems that we are utilizing for 4G, 5G will just sit on top of that. So it is not going to be a capital intensive replacement technology.”

He also mentioned, “at this point there really isn’t many use cases for mobility with 5G. It is more of a fixed point to point broadband delivery at high speed. So that is really the major use case of 5G, doesn’t mean that it can’t develop into more of a mobile technology but right now that is probably further off than the fixed Wireless point to point solution.”

Penetration of 4G LTE

Now let’s look at the penetration of Verizon’s 4G LTE (long-term evolution) component. As you can see in the above chart, the penetration of 4G LTE devices in the telecom company’s postpaid subscribers continued to increase in 4Q15. Year-over-year, the penetration of 4G LTE devices in Verizon’s postpaid connections reached ~79.2% in 4Q15. Note that this metric was at ~66% in 4Q14.

For diversified exposure to select telecom companies in the US, you may consider investing in the SPDR S&P 500 ETF (SPY). The ETF held a total of ~2.4% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of December 2015.

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