3 Wireless Stocks Set to Ride High on the Thriving 5G Ecosystem
In This Article:
The Zacks Wireless National industry is likely to benefit from healthy demand trends with an accelerated 5G rollout and increased fiber densification, helping bridge the digital divide with seamless connectivity. However, high capital expenditures for infrastructure upgrades, margin erosion, supply-chain disruptions and high customer inventory levels have dented the industry’s profitability.
Nevertheless, Cogent Communications Holdings, Inc. CCOI, Liberty Latin America Ltd. LILA and ATN International, Inc. ATNI are likely to gain from higher demand for scalable infrastructure for sustainable networks and fostering innovation with a wide proliferation of Internet of Things (IoT), wireless traction and solid broadband momentum.
Industry Description
The Zacks Wireless National industry primarily comprises firms that provide a comprehensive range of communication services and business solutions. These include wireless, wireline, local exchange, long-distance calls, data/broadband and Internet, video, managed networking, messaging, wholesale and cloud-based services to retail consumers. The firms within the industry also offer IP-based voice and data services, targeted advertising, television, streaming content, cable networks and publishing operations, multiprotocol label switching networking, fiber optic long-haul networks and hosting and communications systems to businesses and government agencies. In addition, the firms provide edge computing services that allow businesses to route application-specific traffic where required and are most effective — whether in the cloud, the network, or on their premises.
What's Shaping the Future of the Wireless National Industry?
Software-Centric Network Rationalization: The industry participants are realigning their wireless network toward a software-centric model to cater to increasing business demands and customer needs through remote facilities. The industry players are focused on bringing improved operational efficiencies through network simplification and rationalization, boosting end-to-end provisioning time and driving standardization. Moreover, the firms are offering a variety of pathways for delivering services through a combination of network-based video transcoding, packaging, storage and compression technologies to provide new IP video formats, live TV, streaming services and home gateways to connected devices inside and outside the home.
Price-Sensitive Competition: Increased infrastructure spending for network upgrades has largely compromised short-term margins. Aggressive promotional expenses, lucrative discounts and the adoption of several low-priced service plans to attract and retain customers in a challenging macroeconomic environment are eroding profits. The companies are making significant investments to upgrade their network and product portfolio, including considerable advances in software-defined, wide-area network capabilities and a new Cloud Core architecture that squeeze margins. High raw material prices due to the Middle-East tensions, the prolonged Russia-Ukraine war and the consequent economic sanctions against the Putin regime have affected the operation schedule of various firms. The demand-supply imbalance has crippled operations and affected profitability due to inflated equipment prices. Wireless operators have been facing challenges due to the disruptive rise of over-the-top service providers in this dynamic industry. Price-sensitive competition for customer retention in the core business is expected to intensify in the coming days. Aggressive competition is likely to limit the ability to attract and retain customers and affect operating and financial results.
5G Ecosystem Gaining Traction: Most industry participants are deploying the latest 4G LTE Advanced technologies to deliver higher peak data speeds and capacity, driven by customer-focused planning, disciplined engineering and investments for infrastructure upgrades. The companies are also expanding their fiber optic networks to support 4G LTE and 5G wireless standards as well as wireline connections. Further, leading firms within the industry have been deploying the C-Band spectrum to gain additional coverage. These mid-band airwaves offer significant bandwidth with better propagation characteristics for optimum coverage in rural and urban areas compared with mmWave. With low latency and increased bandwidth, business enterprises are increasingly embracing the exciting possibilities offered by artificial intelligence and the IoT via the real-time transfer of mobile data. As the 5G ecosystem evolves, customers are expected to experience significant enhancements in coverage and speed.
