The next few months are going to be important in determining who will lead the 5G race. I’m not even talking about globally, but instead about the race here in the US.
I’ve mentioned before that 5G requires the use of frequencies that 4G doesn’t. Currently providers use the 700-2500 MHz range, which is great for range and ability to penetrate buildings. But this is the source of 4G’s limitations on speed and latency.
The midband range that is needed is slowly but surely becoming available and being auctioned off by the FCC. Their latest auction closed at the beginning of the month, and made available the most spectrum licenses ever in a single FCC auction.
Auction 105 included 70 MHz of radio frequencies between 3.5 and 3.7 GHz. This slice is referred to as Citizens Broadband Radio Service (CBRS) and is essential for the promise’s higher speeds and lower latency.
U.S. telecom companies dropped $4.5 billion on this additional spectrums needed for their 5G expansion.
The biggest buyer was Verizon Wireless, who spent $1.9 billion on licenses mainly in densely populated areas. Verizon has the industry’s largest portfolio of high-frequency spectrum licenses but lags behind in mid-band. So, we see it’s working hard to catch up.
The second largest bidder was Dish Network, who spent $900 million. Its strategy is a little different than that of Verizon. It was looking for bands spread over a much larger portion of the U.S. since it’s still in the early stages of building its 5G network from scratch.
AeroNet walked away from the auction as the clear winner in Puerto Rico with 224 licenses covering more than 80% of the area. Comcast’s Xfinity Mobile and Charter Communications Spectrum Mobile each spent about $460 million during the auction as well.
T-Mobile only spent $6 million on this round and AT&T didn’t spend a penny. No doubt both of them are saving up for the C-Band spectrum auction that will start in December.
This may not seem important, but the companies with the best combination of spectrums will be the most successful.
Just looking from a consumer standpoint, why would people spend more money upgrading all their devices to the 5G compatible counterparts if there isn’t expanded coverage and speed?
What good are increased speeds and improved latency if the coverage isn’t there? And what good is expanded coverage if the network improvement isn’t there?
Add This ETF to Increase Exposure
The spectrum auctions will be something that I will be closely watching over the next few months. The framework for the network will give clues to how the rest of the technology will unfold.
Once the network is firing on all cylinders, everything else will fall into place…and the profits will flow. One easy way to make sure you’re profiting from the whole industry is the Defiance Next Gen Connectivity ETF (ARCX: FIVG).
FIVG is the first 5G related ETF and consists of providers of products and services related to 5G implementation. Take a look at some of its top holdings:
Qualcomm Inc: semiconductor and telecommunications equipment
NXP Semiconductors – semiconductors and software
Ericsson –network equipment and software
Analog Devices – integrated circuits used in analog and digital signal processing
Xilinx – designs, develops and markets complete programmable logic solutions
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The holdings also include Verizon, AT&T and T-Mobile. Plus, the slide in tech stocks over the past few weeks has created a perfect buying opportunity.
Shares of FIVG are up 13% over the past year, but not trading at a premium like most technology stocks right now. Meaning there is plenty of room for profits as the 5G story unfolds.
I’m not saying that you’re going to see triple digits gains from this ETF. But it is a quick and simple way to add exposure to your portfolio. If you want my favorite individual 5G picks I recommend that you check out all the details to make sure you’re added to my VIP list.
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To your prosperity and health,
Joshua M. Belanger
Executive Publisher & Founder