AT&T, Verizon Communications, Sprint and T-Mobile US might see a five-year to 10-year wait for “significant” payback on 5G, credit-rating agency Standard and Poors says. And the ratings agency seems to believe that the financial upside will come from internet of things use cases, not consumer broadband services.
On the other hand, many observers believe the initial use cases will be consumer broadband related–both mobile and fixed. The issue there is that much of that activity will simply shift revenue from existing 4G to replacement 5G accounts, with unclear revenue upside.
Still, significant financial returns within a five-year window should be counted as a clear success; a 10-year wait perhaps not unexpected if IoT drives major new revenue sources. It might well take that long for IoT to drive significiant incremental revenue.
The useful life of a mobile network is about 20 years, with a peak reached about 11 years into the commercial use of the network. Significant payback in five years is normally an indication of success, with a network reaching its peak of use within about 11 to 13 years.
Also, since many of us believe the big boost in revenues will come from enterprise use cases and internet of things, and since that will build towards the latter half of the 5G life cycle, a surge in revenues toward the latter half of 5G network useful life would not be unexpected.
Standard & Poor’s, for example, says AT&T and Verizon, along with T-Mobile US and Sprint should focus 5G services on the industrial Internet of Things as a growth opportunity.
“For U.S. telecommunications companies, we have a cautious view on 5G wireless and believe that accelerated deployments could hurt balance sheets that are already stretched because of mergers and acquisitions, mature industry conditions, and competitive pressures,” S&P analysts Allyn Arden and Madhav Hari said.
“We believe the revenue growth associated with 5G will be constrained,” the analysts added.
“The bulk of the (Internet of Things) revenue opportunities may not materialize for at least five to 10 years,” they say.
