Last month, cellphone rivals T-Mobile US (NASDAQ:TMUS) and Sprint Corp (S) announced plans to become one. Their argument for the merger has to do with a technology thats talked about often but not often explained in-depth: 5G technology.
So instead of focusing on the investment merits of cellphone stocks at this time, let’s instead take a look at some basic information that can help you better determine those merits on your own in the future. What is 5G technology?
While many people assume the G stands for “gigs” or something like it, the G actually stands for generation. Each G is “new generation of wireless technology,” as PC Mag explained in March. In a nutshell, the first generation of wireless technology was analog; the second allowed for digital service; the third added data; the fourth added speed.
So then 5G is about speed—and really, what that speed will allow. According to CNBC, the proposed industry standard for 5G would “theoretically be 10 times faster than 4G,” which means you can access apps that require significant data in less time.
Another word to be familiar with when discussing 5G is latency—the amount of time it takes for data to be transferred between devices. As you probably could guess, that’s going to improve too. Reduced latency is especially important for the burgeoning Internet of Things and is possible because of the type of encoding 5G networks use.
It’s important to understand 5G because the technology is important to the fundamental business of many tech stocks. Broadcom’s proposed acquisition of Qualcomm, Inc. (NASDAQ:QCOM), for instance, was blocked because some analysts believed it could hinder 5G development.
AT&T (T) has claimed it will be the 5G first-mover, with a 12-city network on tap by the end of the year. Verizon (NYSE:VZ) has a 5G home modem, while Samsung Electronics Co Ltd (OTCMKTS:SSNLF) has 5G equipment that was the first to receive FCC approval, according to TechRadar. JP Morgan, in fact, upgraded Verizon stock recently, citing 5G as a bullish factor.
The list goes on. By 2020, 5G is expected to be available worldwide. The European Union struck a deal in March to free up space for the new network and a shake-up in the cellphone industry could impact development as well.
As you read headlines related to your favorite stocks, don’t forget to do your homework about the technology and other fundamentals fueling them. Understanding what 5G technology is, for instance, is important for anyone looking to make a bet in the cellphone space.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.