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Supertrends: Investing in telecom infrastructure

5G technology is likely to transform communication sector. This means interesting investment opportunities.

Infrastructure remains an undisputable global priority. Reflecting its importance, the G20 Summit in Buenos Aires lists infrastructure as one of its top three priorities. We continue to believe in the great investing potential of this theme, but we are adding a new angle with telecom infrastructure, where we expect 5G networks to act as an interesting catalyst.

5G technology is going to change telecom

The communication network sector is entering the next phase of evolution. Market research firm MarketsandMarkets expects network infrastructure investments in mobile data transmission technology of the fifth generation (5G) to start this year and reach a volume of USD 33 billion by 2026.

What 5G means for the broader world

5G essentially brings three things with it – higher data transmission capacity (70 times faster download speed than that of the 4G network), much lower latency (1/50th compared to the 4G network) and substantially higher capacity todeliver data.

There are several angles how these characteristics could impact the way this technology is used in the near future. First, the addressable market for mobile telecoms could increase substantially. For example, video content such as live sports and movies – still primarily the exclusive domain of TV and PC browsers – will be available to viewers at a lower cost on smartphones and other mobile devices. The improved connection density (i.e., the number of devices that could be connected per cell site) will in our view provide an ideal platform for the Internet of Things (IoT), which could attract companies from a broad range of industries.

Internet of Things should become a mass market

The IoT will likely create a viable market encompassing not just conventional mobile devices such as smartphones and tablets but also a broad variety of other equipment like wearables, industrial equipment, home appliances, and automobiles. For the ultra-low latency feature, automobiles (specifically, self-driving cars) are poised to be the key beneficiaries. The new standard will likely allow even objects traveling at high speeds to secure access to a mobile network.

Moreover, the technology should allow more devices and things to be connected to the internet, opening up new ways to collect, manage and analyze data.

Supertrends: Investing in telecom infrastructure

While so far the consensus view is that investments in 5G will not start to be material before 2020, the US and China already seem to be competing to build out the superfast network as soon as possible, with deployments starting as early as the second half of this year. In line with these investments, we expect continued strong demand for datacenters, which, for security reasons, are likely to become more localized (country-by-country hosting).