T-Mobile Will Lead US 5G Market, Analyst Firm Predicts

The story of U.S. mobile operators in 2020 is of a T-Mobile US that is soaring, an AT&T that is tanking, and a Verizon that drifted lower, MoffettNathason wrote in its year-end assessment of the market.  The story of U.S. mobile operators in 2020 is of a T-Mobile US that is soaring, an AT&T that is tanking, and a Verizon that drifted lower, MoffettNathason wrote in its year-end assessment of the market.  The investment research firm remains just as skeptical as ever about 5G use cases and the difficulty operators will confront in gaining a meaningful return on their 5G investments. If anything, on a market-wide basis it expects return on investment (ROI) to be lower for mobile operators as 5G requires “lots of” incremental capital spending. T-Mobile remains a standout in that regard and many others related to the 5G story, the analysts wrote. “T-Mobile doesn’t need to find all new use cases, or even to raise prices, to monetize its investments in 5G. Their path to an attractive ROI in 5G is simple: higher market share.” MoffettNathason previously argued that T-Mobile US’ acquisition of Sprint positioned it to be the market leader on 5G and as 2021 approaches it believes market share estimates for T-Mobile US are “too low, particularly in the business wireless segment.” Verizon attracted more of a middling assessment from the firm, which expects the operator’s average revenue per user (ARPU) to rise sharply in 2021, with an eventual return of roaming revenue and its ongoing push to put more customers on unlimited, higher-cost data plans. The firm’s “concerns about AT&T remain largely unchanged” due to its level of debt and the ongoing decline of its acquired businesses that have been exacerbated and accelerated by the global pandemic. “When the pandemic hit, all the secular problems were brought to the fore, and were compounded by the cyclical pressures of the COVID recession,” the analysts wrote.  AT&T is over-leveraged and that directly impacts its ability to acquire more spectrum to maintain competitiveness in 5G, the analysts warned in October and reiterated this week. If AT&T spends the money required to acquire more spectrum in the ongoing C-Band auction it will put investor dividends in a more precarious position, and if it doesn’t, AT&T’s “competitive position will be compromised. We see no good outcomes,” the analysts wrote. Finally, MoffettNathanson said it remains skeptical about Dish Network’s position and, by extension, its ability to become a genuine nationwide 5G operator. “Building a truly competitive network will require far more than a macrocell canopy, and building a competitive network can’t be limited to just those urban areas” that will allow it to reach requirements set by the Federal Communications Commission (FCC), the analysts wrote.  The firm questions Dish’s claim that an open radio access network (RAN) infrastructure will be achieved through significantly lower cost, and the company’s recent announcement of convertible preferred notes to generate more financing for its 5G efforts is a “bad sign for valuation. Worse, it makes clear that they still don’t have a strategic investor up their sleeve,” the analysts wrote. In 2021, the biggest beneficiaries of AT&T’s struggles and Dish’s status as an aspiring greenfield operator will be T-Mobile US and Verizon, according to MoffettNathanson. T-Mobile US is “poised to have the industry’s best network,” AT&T “faces cyclical and secular challenges in each and every one of its businesses,” and Verizon’s early commitment to millimeter-wave (mmWave) spectrum has given T-Mobile US a multi-year head start on 5G, the firm concluded. As for Dish, it asked: “What’s a wireless promise, with no network but a commitment to build one, worth?”