Apple stock should benefit from its new 5G-ready iPhone 13 devices this fall, but the move also promises to set the stage for T-Mobile stock and the company’s marketing muscle when it comes to competition among wireless providers.
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T-Mobile US (TMUS) will be well ahead of rivals Verizon Communications (VZ) and AT&T (T) when it comes to building a high-performance, mid-band 5G wireless network. T-Mobile’s moves over the past year promise to reshape the competitive landscape. And late 2021 will look a lot different than the end of 2020.
In June, T-Mobile said its mid-band 5G network will reach 150 million people. In addition, T-Mobile expects the mid-band 5G network to cover 200 million people by the end of 2021 and 300 million by 2023. On the other hand, Verizon and AT&T will not have 5G mid-band networks widely deployed until 2022.
Meanwhile, consumers appear to be more attentive to 5G this time around. The rollout of the iPhone 12s last year — the first 5G iPhones — by Apple (AAPL) didn’t set off a wireless pricing war. The wireless firms figured correctly that some consumers would rush to buy 5G iPhones as early technology adopters.
Further, a move into 5G phones last year didn’t do much for Apple stock. Consumers that did purchase iPhone 12s soon learned that while they provided social cachet, data speeds were similar to existing 4G wireless networks.
Now, however, all three wireless firms are deploying high-performance mid-band radio spectrum, with T-Mobile stock in the lead.
Apple Stock: IPhones Spur Wireless Promotions
T-Mobile says that on average, its mid-band 5G network currently is three times faster than its 4G network. It delivers average download speeds of 325 megabits per second with peak speeds of 1 gigabit per second. Plus, 5G networks are expected to deliver faster speeds as network coverage improves.
Analysts expect 5G marketing this fall by T-Mobile, Verizon and AT&T to focus on smartphone trade-in offers rather than price discounts. That should be a plus for Apple stock, since more consumers are expected to upgrade to 5G iPhones.
“A new iPhone cycle always triggers a round of rich promotions,” MoffettNathanson analyst Craig Moffett told Investor’s Business Daily. “What’s different this time is that AT&T and Verizon started offering very aggressive promotions long before the new iPhone.”
“In the next iPhone cycle, T-Mobile will benefit enormously from earned media,” Moffett added. “There’s a huge press ecosystem around new iPhone launches, and all those articles will tell consumers that T-Mobile now has the best 5G network.”
At UBS, T-Mobile stock analyst John Hodulik has a similar view.
“I don’t know why T-Mobile wouldn’t try to exploit the advantage it has in 5G deployment with aggressive promotions around the iPhone 13,” Hodulik told IBD. “That said, all three of the carriers are on the front foot and seem unwilling to cede share.”
Verizon aims to reach 175 million people by the end of 2022 with mid-band spectrum-based 5G services.
Cable Companies Gain Traction In Wireless
Verizon spent $53 billion in a government auction of mid-band radio spectrum, including incentive payments to satellite operators and clearing costs.
Wireless competition has already been heating up in 2021 as cable TV companies Comcast (CMCSA) and Charter Communications (CHTR) try to chip away at the market share of the big three service providers — Verizon, AT&T and T-Mobile.
The cable TV firms entered the wireless market in 2018. Comcast and Charter lease network bandwidth from Verizon under a wholesale agreement.
Comcast had 3.1 million mobile lines in service as of March 30 while Charter had 2.67 million. Including Altice USA (ATUS), cable TV firms grabbed 35% of postpaid phone additions in 2020 and 33% in the first quarter of 2021.
In the first quarter of 2021, Comcast’s wireless business broke even on an EBITDA basis for the first time. The acronym refers to earnings before interest, taxes, depreciation and amortization.
New Verizon Wholesale Network Deal Boosts Cable
“Comcast’s recent achievement of segment breakeven suggests that their underlying contract economics with Verizon, renegotiated last year, have gotten more attractive, affording Comcast and presumably Charter with newfound optionality,” Moffett said.
Thanks to the new wholesale deal with Verizon, Comcast recently introduced new multiline wireless plans. The new plans started at $30 per line for four lines.
“Cable has gotten more aggressive with Comcast’s new family plan pricing in April. We think Charter will make a similar move in the next couple of months,” said Hodulik.
At a JPMorgan conference in May, Comcast Chief Financial Officer Michael Cavanagh outlined his company’s strategy. He said Comcast is focused on offering wireless services in a package with high-speed internet services.
“We think it’s a natural bundle on connectivity between our broadband business and wireless,” he said. “It definitely has proven out that it’s lowering churn for us.”
The cable TV industry generally does not sell wireless services outside of markets where they provide video and broadband services. Still, Comcast and Charter should see upside from Verizon’s mid-band 5G network in 2022, even if it’s later than T-Mobile’s. The wholesale agreement with Verizon gives them access to all 5G network services.
Apple Stock Underperforms S&P 500
Meanwhile, Apple stock could use a boost from a promotional battle among wireless service providers. JPMorgan analyst Samik Chatterjee in a recent note to clients said Apple stock has underperformed in 2021 versus the S&P 500.
“This underperformance is led by investor sentiment relative to limited upside to 5G iPhone expectations,” he said.
Chatterjee expects iPhone 13 sales to be better than earlier projected.
“We see the setup into the iPhone 13 launch as similar to iPhone 11 cycle, with a multiyear 5G tailwind to the replacement rate,” he said.
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Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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