The 5G Revolution: How will 5G drive new investment and M&A in the US communications sector?

NEW YORK, March 26, 2019 -- With the US mobile industry rapidly preparing for the 5G revolution, discussion about how this next generation network technology fits into the wider commercialization of the communications ecosystem is reaching its peak.  5G progress in the US is being led by the wireless and telecommunications industries and government agencies. Verizon and AT&T have already launched their early 5G home and mobile hotspot services. Meanwhile, the Federal Communications Commission’s (FCC) $2bn Connect America initiative to expand wireless broadband in rural communities and the 24 GHz auction to open up the wave spectrum for commercial use are also underway.

Jim Hyde, CEO of communications infrastructure provider ExteNet Systems, believes that the exponentially growing user-bandwidth demand and new spectrum availability will serve as the catalyst for 5G network densification as well as result in an increased adoption of the 5G enhanced mobile and fixed broadband use case.

‘Mobile network operators and other carriers are well-positioned to capitalize on 5G opportunities, shifting the focus to monetization strategies,’ said Hyde. ‘With the MNOs and carriers owning both the spectrum and the customer relationship, their ability to monetize their investment effectively will be imperative as the stakes are high. We also expect private networks to become more prevalent over the near term.’

ExteNet Systems has played an integral role in pioneering, designing and building the next generation of wireless networks. ‘In a standard lifecycle, network maturity and new technology triggers incremental investment, and we believe 5G will be no different,’ added Hyde. ‘Since 5G build is just commencing, capital expenditures will be higher than the recurring operating expenses in the near term; however, our customers demand technology and solutions that will drive total cost efficiencies over time.’

Meanwhile, a leading US Mobile Director of one of the Big 4 mobile operators affirmed, ‘For the US to be ahead of the world in 5G, we need to be able to densify the network. The cost is going to affect how quickly that can happen.’

Consolidation is still driving the market

2018 was a record year for investment in communications with several of the largest merger valuations in history. However, M&A activity was driven by smaller companies with deals valued at less than $100m, demonstrating that consolidation is still driving the market.

Richard S. Lukaj, Senior Managing Director of the private investment banking firm, Bank Street, predicts that the next two years will see the telecoms and media industries increasingly converging, with the demand for data and a shortage of infrastructure assets increasing investment and driving consolidation.

Lukaj, stated, ‘The blurring of telecommunications, media and technology industries will continue with businesses chasing M&A deals that enable them to adapt their businesses models to their changing ecosystem.

Such transactions will also enable companies to diversify their offerings and remain competitive against interlopers into their traditional sectors. As an example, we see attractive opportunities for companies with expertise in deploying wireless infrastructure and networks of small cells to connect with data center infrastructure and backbone fiber network providers. Thus, major mobile tower operators will continue to seek innovation and widen their M&A focus to companies that hold significant complementary communications assets, most notably REITable edge computing, data center interconnectivity, fiber optic and small cell technologies and these manoeuvres will become even more strategically more important with time.’  

Hyde and Lukaj are speakers at the upcoming TMT M&A Forum USA 2019 (April 11, New York). The event, sponsored by Santander, Tillman Infrastructure, Bank Street, WIS and MVP Capital offers more than 200 M&A professionals the opportunity to engage with leading figureheads and discuss edge computing and infrastructure, 5G investment, M&A strategy and changing trends within the telecommunications M&A landscape.

Innovation is driving M2M communication investment

Hyde believes that 5G will drive increased productivity and efficiencies, with economic prosperity being the larger goal.

‘Machine-to-machine (M2M) communication, including IoT, is an area where increased investment and M&A activity will continue to occur,’ said Hyde. ‘Innovation is driving M2M and the complexity of interconnecting devices in both micro and macro scenarios drives more cache and compute requirements at the network edge. As a result, vision clarity and well-designed network architecture will play a significant role in enabling a forward-looking network and device interconnectivity, and we expect notable new investments and M&A activity in network and device interconnectivity over the next few years.’

The provision of enhanced broadband to the consumer market has been at the heart of early 5G deployments, with IoT and ultra-reliable, low-latency communications due to gain scale shortly. The digitisation of industries and businesses create a more favourable environment for exploring incremental revenue opportunities, particularly in the enterprise market.

Hyde added, ‘5G will be the connective tissue that enhances the use of next-gen technology including IoT, autonomous vehicles and mobile media, among others. As we design the network of the future with 5G, we cannot afford to adopt a band-aid approach and compromise quality. Ultimately, enterprises and consumers everywhere will be the true beneficiaries of 5G, as technology continues to enrich and improve the way in which we live our lives.’

For more information about the TMT M&A Forum USA 2019, including tickets, please visit TMT M&A Forum USA 2019 or contact for speaker and sponsor opportunities.