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Can 5G Really Boost Verizon Stock?

James Brumley

Verizon Communications (NYSE:VZ) arguably won the 5G race in October, when it launched the nation’s first wireless 5G at-home broadband service. Granted, it was a dubious win that may or may not have actually helped boost VZ stock. Being the first to achieve any technological feat, however, translates into good publicity.

5G Wireless Technology Will Continue to Drive Verizon Stock

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Now the telecom giant may be positioning to set the pace for “real” 5G when that becomes the norm sometime later this year. Specifically, on Tuesday Verizon announced a “Built on 5G Challenge” which is supposed to encourage tech developers to create solutions that best utilize the power of ultra-high-speed wireless connections.

The contest is once again great publicity, but more than that, it may actually serve as a breeding ground that puts Verizon front-and-center among the outfits aiming to utilize the nascent platform.

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It may also be something of a red flag for VZ and VZ stock.

The First to Cross the Finish Line

5G is not yet available to most smartphone owners, but should be later this year. Once the infrastructure is in place and wireless customers have the right phones,  they will enjoy 5G broadband speeds that are effectively 20 times faster than the standard 4G network most smartphone users utilize now.

5G will easily make mobile phones powerful entertainment and business tools, but that won’t be the most exciting part of it. The oft-discussed Internet of Things (IoT) era, for instance, will be ushered in by 5G connectivity, enabling the automated transfer of massive amounts of digital data.


But Verizon’s October unveiling of at-home 5G connectivity was aimed at consumers who want high-speed internet, delivered by a provider that won’t run a physical line all the way to their homes.

That launch was widely criticized because the hardware used to power the connections doesn’t comply with  the working standard the industry’s other key players like AT&T (NYSE:T) and T-Mobile (NASDAQ:TMUS) have decided upon. That standard is known as 5G NR.

Verizon’s 5G TF hardware will have to be swapped out once 5G NR standards are firmed up. Sprint (NYSE:S) even went as far as to file a lawsuit against Verizon for what it alleges are misleading statements about Verizon’s 5G network.

But building a standard-compliant 5G network was never Verizon’s point. Demonstrating its lead in 5G was its point and purpose.

Mission accomplished. But at what cost and to what end?

Uses Remain Unclear

While 5G NR technology may not be completely ready, the 5G NR standard is gelled enough to be used as a developmental platform. To that end, VZ has committed a prize pool of $1.75 million that will be given to the top three small companies that come up with the best ideas on how to use 5G.

The contest tacitly touches on one stumbling block for 5G:it will be very expensive to utilize the most impressive capabilities of 5G.

While 5G connections via smartphones don’t appear as if they will cost mobile customers leaps and bounds more than 4G connectivity, consumers don’t necessarily need wireless connection speeds 20 times faster than their current service.

That’s not true of companies and other organizations. Networks of thousands of smart meters that a utility company may wish to deploy, precision manufacturers, and smart/self-driving vehicles all need ultra-high-speed connections and can make the best use of them. Those applications of 5G technology will be very expensive.

Beyond that, though, practical applications of the technology remain fuzzy. Even as recently as January, the best argument Verizon CEO Hans Vestberg could muster for 5G was, “It’s so much more – it’s going to be cordless manufacturing, it could be retail stores that capture real-time information in order to give you, as a customer, a much better experience when you’re in the store.”

Retailers may, however, have maxed out on the amount of technology they truly need to tap. Manufacturers seems to be doing well enough as-is.

It’s time for the specifics to start materializing.

The Bottom Line on VZ Stock

The contest, which is more of a grant program, in and of itself will do little to prod VZ stock in either direction. What VZ learns and the tech it gains from the Built on 5G Challenge, however, may serve as seeds for the company’s biggest current priority.

And it needs to. While customers often have difficulty initially understanding and utilizing new technologies, some recent tech evolutions have proven to be more bark than bite even well after theior launch. Virtual reality comes to mind. It was and is amazing, but it’s hardly the earth-shattering development it was billed to be.

It’s a matter current and would-be owners of VZ stock may want to put on their radars, considering the company plans to spend between $18 billion and $19 billion on equipment next year, and most of that spending is meant to maintain Verizon’s lead in the 5G race.

Related questions are likely to come up during the Q&A portion of the company’s Apr. 23 earnings call.

As of this writing, James Brumley held a long position in AT&T. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.

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