The Impact of 5G on M&A

By Nick Stevenson
Published May 9, 2019 | 3 min read

The past 18 months has led to many milestone moments for 5G. Not only because of the rollout which, by huge consensus, will fundamentally change the digital landscape as we know it – but because of the impact 5G has already had on M&A.

Last year saw the announcement of what has been dubbed the first ‘5G merger’ between T-Mobile and Sprint. The pending merger will create a $146 billion media and telecom giant that will be better-resourced to compete against rivals AT&T and Verizon to deliver on the high expectations of 5G.

To get to the promise of a hyper-connected reality that will increase productivity for all, it’s clear there are still many structural and capacity issues to address. 5G will impose significant demands across communications infrastructure in order to meet network performance targets: 100 megabits per second (Mbps) sustained bandwidth with +10 gigabits per second (Gbps) peak data rates, radio latency of less than 1 millisecond, ultra-reliability, and increased data generation and consumption resulting in 10,000x more traffic.

The groundwork laid to future-proof new 5G networks has been significant, with the first stage of 5G capital investment from the U.S. carriers expected to hit $100 billion through 2020 alone. Additional investment beyond 2020 will be required to expand the 5G footprint beyond the urban areas and the sum could materially exceed the first stage investment.

The 5G Upgrade

The sheer volume and extent of change needed to design, develop, and construct a comprehensive, nationwide 5G network needs policy-makers, innovators and incumbents to collaborate and converge in ways never previously imagined.

The payoff to this will be a vast societal benefit that is surprisingly difficult to define, thanks to technology that is yet to be conceived. From 1G, which brought mobile telephony to the masses, to 4G which triggered the aggressive growth of Facebook, Amazon and Netflix, 5G is the point at which the Internet of Things will finally come into its own. We know about autonomous vehicles, but new use cases will also radically affect how our well-being is monitored, how we are educated and how we are entertained.

The investments into 5G will be huge and far-reaching, spanning widely across technologies, telecommunications, media, transportation, healthcare, mining and AI industries to name a few. This will likely spur a further surge in M&A as part of a landgrab to secure more integration – from base-level infrastructure to value-added digital services. 

But M&A is also one symptom of the fear of missing out. The step-change just around the corner is driving consolidation among companies eager to exploit the predicted 8 billion personal mobile devices and 4 billion IoT connections by 2022. As Cisco’s Senior Vice-President and General Manager, says: “Global mobile traffic [is approaching] the zettabyte era.”

Companies may not even know the opportunities opening up – but they undoubtedly want to be at the forefront when they occur.

Two positive transformations are set to occur as a result of this massive investment in 5G networks and services: a GDP boost to the U.S. economy and increased efficiencies across industries. 

At a state level, Ericsson quotes the top five winners from the predicted GDP and jobs gain as California, Texas, New York, Florida and Illinois, adding between $24.6 billion to $69 billion across each state per year. Industry will also share in the spoils to the tune of over $1.3 trillion by 2026. The top five sectors are energy & utilities, manufacturing, public safety, healthcare and public transport.

Indeed, 5G will affect a vast array of business processes leading to more integration as companies adapt to this rapidly changing reality. The depth and scale of change in the face of such an enabler as 5G will trigger a corporate upheaval, with businesses continuing to jostle and converge for leadership positions in their respective verticals. 

5G won’t be an overnight switchover. The infrastructure is evolving at a rapid but manageable pace alongside 4G. But its knock-on effect on media, telecom, tech and other related sectors will be far-reaching, and will fuel yet more M&A activity for some time to come.

Nick Stevenson

Nick Stevenson
Global Head of Communications, Media and Entertainment (CME)