The 5G mobile communications revolution: Who will be the winners?

The focus is on extreme speeds, low transmission latency and higher capacities. The new mobile communications standard will create new manufacturing processes in terms of automation. At work and during leisure, on the other hand, 5G will be a prerequisite for the creation of augmented and virtual reality services, as these require extremely low delay times. Finally, all types of automated vehicles will rely on a superfast mobile broadband with low latency.

• It’s exciting times for the world with all industries being digitalized in some way or another. The US and China are battling to innovate and create new business models and make old ones more efficient. The holy grail is the access to all the data created by “the internet of things” and use artificial intelligence in order make better decisions. But first, a nation needs to have great infrastructure in terms of quality telecom networks, says Erling Thune.
  

• The sad part of the story for us Europeans is that Asia and the USA are way ahead of Europe. We used to rule the world in the early days of mobile telephony, but EU regulations have reduced operators incentives to invest and that has destroyed our hegemony. But the consequences by missing the 5G-train can be even more detrimental. Think about the effects it can have on for example the European car manufacturers if we fall behind the rest of the world. Europe currently makes the least efficient use of spectrum and networks, with its “at least four operators in each market”-policy. It’s like building four highways next to each other where you have congestions in some lanes whereas other lanes are empty. The EU regulators will have to change their policy in order to secure the future for the European industry.

Most people think of self-driving cars when thinking of automated vehicles. When it comes to 5G, we think it is more interesting to think of other vehicles where you don’t need a human to be on board. This can be delivery drones or drones used in farming. Think about the efficiencies by automating, in how harbors operate. At some point in the not so distant future a crane lift operator should be able to work from home as well – operating a construction site on any place in the world from his or her home office. That will of course require good reliable 5G networks.

We believe that Deutsche Telekom is well positioned mostly because of their superior 5G position in the US, following the merger with Sprint. At the same time, Europe's largest telecommunications company is determined to maintain its network leadership in Germany. We also expect that the most important partners for 5G services will prefer those market leaders with the best networks.

Ambivalent stance towards Chinese tech company Huawei

The US have taken hard measures in order to block the Chinese group Huawei access to the US market. For the roll-out of the European 5G infrastructure, the EU Commission and the German government are pursuing a relatively moderate strategy compared to the US. Italy and the UK, in addition to Sweden, have on the other hand decided to exclude Chinese suppliers in whole or in parts of their networks. The EU has only recommended "avoiding dependencies on suppliers that are considered risky." Europe is divided, with the UK firmly on the side of the U.S. and parts of Eastern Europe siding more with China.

Germany, meanwhile, is trying to employ a pragmatic approach as it seeks to protect its large export industry to China. Most Western European countries have taken various measures to prevent Huawei from becoming part of their core telecommunications networks. Looking five to seven years ahead, they will replace their radio access with those of Nokia and Ericsson, hurting Huawei. As suppliers of telecommunications equipment, both companies will also benefit from the ban on Chinese competitor Huawei. In Sweden, Huawei was recently excluded from a public tender, against which the Chinese have taken legal action. But even if Ericsson were to lose its Chinese business for this reason, the company will still be one of the major beneficiaries of Huawei's restricted business activities. Many manufacturers of technology products are shifting their production away from China. We expect this trend to continue. Countries like Taiwan, Korea, Vietnam and Thailand are expected to benefit from this development.

Disclaimer: The information in this document is not binding. Statements in this document should not be understood as an offer, recommendation or solicitation to invest in or sell UCITS funds, hedge funds, securities or other products offered by DNB Asset Management or any other company within DNB Group or any other financial institution.

All information reflects the current assessment of DNB Asset Management, which is subject to change without notice. DNB Asset Management does not guarantee the accuracy and completeness of the information. This information does not take into account the individual investment objectives, personal financial situation or specific requirements of an investor. DNB Asset Management does not accept any responsibility for losses incurred on investments made on the basis of this information. Our general terms and conditions can be found on our website www.dnbam.com.