T-Mobile and Verizon Push ‘Fixed Wireless’. What does this mean for stocks?
Wireless home broadband is the hottest trend in the telecommunications industry, offering customers low-cost internet and fast self-installation.
There are two stocks that investors should consider when looking at opportunities in technology.
T-Mobile: USA (mark: TMUS) and Verizon: (VZ) Communications has sought to capitalize on the growth of fixed wireless by allowing them to offer home broadband services alongside their mobile services. This means they are taking advantage of the traditional defensive qualities of telecom stocks while taking market share away from their cable rivals.
Fixed wireless Internet uses radio frequencies rather than cables to provide home broadband access. While peak internet speeds are typically lower than those achieved over fiber, its main selling point is the price—it’s generally cheaper.
Last year, fixed wireless represented 90% of the 3.5 million net additional broadband subscriptions in the U.S., according to Leichtman Research Group. The speed of adoption is impressive. Fixed wireless additions reached 730,000 in 2021, accelerating to 3.1 million in 2022.
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T-Mobile USA
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which was a Barony The stock pick last year is fixed wireless leading among the big three carriers. It is targeting seven million to eight million subscribers for its fixed wireless broadband by 2025, up from 2.6 million by the end of 2022.
Shares of T-Mobile USA are up 15% over the past 12 months, outperforming the S&P 500’s 11% decline. It trades at about 18 times its forecast earnings over the next 12 months, below the five-year average of 31 times. to FactSet.
Verizon said it expects to have four to five million fixed wireless subscribers by the end of 2025, up from 1.45 million at the end of last year.
Verizon:
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The stock has fallen 27% over the past year, hurt by subscriber losses in the consumer mobile segment. It trades at just 7.8 times its forecast earnings over the next 12 months, according to FactSet.
Rival AT&T ( T ) is taking the opposite route, prioritizing fiber broadband and mostly using fixed wireless only as a supplemental solution. AT&T does not share numbers for its fixed wireless customers.
“In very densely populated areas, with fixed wireless, there is not enough spectrum to serve customers long-term. We believe fiber is the best way to serve those customers,” said Gordon Mansfield, AT&T’s vice president of global technology planning. Barony at the recent Mobile World Congress in Barcelona.
Shares of AT&T are up 5.1% over the past 12 months.
Wireless carriers not only compete with each other, but also with cable companies such as Comcast ( CMCSA ) and
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Charter Communications (CHTR). Fixed wireless is generally cheaper than fiber. T-Mobile offers its home Internet service for $50 a month with no annual contract. Last year, the average cost of high-speed Internet service in the US was $74.99 per month. according to Last year’s Consumer Reports survey.
“Some of them [fixed wireless] the offers look pretty attractive, and that’s what’s putting pressure on the US cable industry in particular,” said Kester Mann, director of consumer and communications at consultancy CCS Insight. Barony.
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The question investors should consider is whether fixed wireless is reaching its ceiling, both in terms of customers it can take from cable companies and technological capabilities. Wireless networks have a limited amount of data they can process without slowing down.
UBS analysts said in a recent research note They believe that fixed wireless is close to the peak of its growth. However, they don’t expect a significant drop in the number of additions until 2024 “at the earliest.” That suggests T-Mobile US and Verizon’s subscriber numbers will continue to benefit from their fixed wireless investments for some time to come.
There is also the prospect that advances in technology could increase the opportunity for growth. The use of millimeter wave spectrum – extremely high radio frequencies – allows wireless connections to rival the speed of fiber optic cable over short distances. The demand for fixed wireless communications may encourage operators to install the necessary equipment in dense, urban areas.
The success of T-Mobile US and Verizon’s fixed wireless has given them a solid footing to offer popular mobile and home broadband bundles. As cable companies fight back with their own wireless offerings, T-Mobile US and Verizon benefit from having their own network infrastructure they’ve already invested in, rather than relying on partners and not having to spend as much on fiber expansion :
At least in the short term, wireless carriers have gained an advantage that should stand them in good stead in a telecommunications industry that is increasingly consolidating in an effort to offer customers all their needs on a single network.
Email Adam Clark at adam.clark@barrons.com
