In today’s Tower Ticker news section, we told you about Wells Fargo analyst Jennifer Fritzsche’s take on T-Mobile results, but before that carrier reported results on Tuesday, the Wells Fargo telecom team attended an event at the Verizon Wireless (NYSE: VZ) headquarters in New Jersey and got loaded up on the latest 5G development news and had “a Q&A period with the C-Suite Management team.” The analyst reported “(W)e walked away from the event with continued conviction in VZ’s forward-looking strategy. While the technical 5G standards are still a few years away, VZ is clearly making their voice heard in driving the ecosystem. The planned 5G strategy also has read-throughs for others on our list including fiber companies (positive read-throughs) and somewhat longer term unknowns — concerning read-throughs for some of the RLECs that operate in more dense areas.”
Wells Fargo said based on the 5G demo, the team saw, “(O)ne of the biggest improvements in technology has been the decrease in the size of the equipment and the ability to recalculate the stream of data at an incredibly rapid pace. What was most amazing to us standing in this ‘condo’ was where VZ plans to go with 5G. It is truly about fixed wireless broadband replacement with theoretical speeds of a minimum 1Gbps.”
And fiber plays a huge role in Verizon’s future, Wells Fargo believes. It’s ‘One Fiber Network Plan’ is a new strategy and is associated with its recent announcement to push fiber deeper in the Boston area, the analysts observed. They report Verizon VP/CTO Nicki Palmer as saying “we realize there is going to be a great demand for fiber” and “this is a pretty important shift for us.” Wells Fargo’s response was optimistic: “This way it is very much echoing what we have heard from AT&T. VZ is clearly putting its money where its mouth is with both the XO transaction and Boston announcement. We do not believe this fiber commitment will stop here. This fiber push serves a dual purpose – both wireline and (perhaps more importantly) wireless support (C-RAN, small cell etc).”
With Verizon’s 5G plans becoming clearer during the visit, the analysts now wonder what the implications are for others. They believe “Verizon has shifted and will try to lease fiber from other incumbents outside its incumbent states (CenturyLink Inc and Frontier Communications specifically mentioned by name). But our question… what would motivate these carriers to play nice with VZ when VZ’s 5G plan is to go right after them – hard. So where do other dark fiber partners come from? ZAYO comes to mind. And if you have VZ being a lot more aggressive in its out of region fiber strategy, this may wake up the fiber giant (Level 3 Communications) to revisit dark fiber in a more serious way. So net net – while still early…if VZ carries through on its promises for 5G – this could be a significant boon for fiber companies (both those who own fiber and build fiber [Dycom Industries]!) and a competitive unknown/ overhang for the rural local exchange carrier (RLEC) wireline only players.”
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