Telecoms deadlocked ahead of 5G rollout: analyst

No major wireless provider stands out as most likely to benefit from Canada’s looming 5G network rollout, despite two players’ extensive combined wireline footline placing them on the “front foot”, RBC Capital Markets analyst Drew McReynolds says. In an annual overview of the telecom sector, McReynolds said Telus Corp. and BCE Inc.’s intention to continue their network sharing agreement to 5G, as well as their extensive fibre-to-the-home networks, placed them at a relative advantage, but each major provider had their strengths and weaknesses as they jostle to benefit from the 5G deployment. The intended sharing agreement would be similar to models for the 4G network where both companies were responsible for 50 per cent of the network, with Bell to be mostly focused on eastern Canada, and Telus on the country’s west, McReynolds said. Bell’s existing spectrum licences in the key 5G frequency of 3.5 GHz, held through its Inukshuk partnership with Rogers Communications Inc., combined with its wireline-wireless integration, places it in “pole position” ahead of the upcoming spectrum auction, McReynolds says. Despite the joint ownership of Inukshuk and being similarly 5G ready inside its cable footprint, McReynolds said Rogers appears less likely to be prepared from an infrastructure standpoint than Bell or Telus because it has indicated it plans to deploy a 5G network on its own, without relying on network sharing as it does for 4G. In May, Rogers’ chief technology officer Jorge Fernandes said that the technology requirements of the upcoming 5G roll-out would make a network sharing arrangement more trouble than it would be worth. But McReynolds said the prolonged 5G rollout means Rogers has the “time and flexibility” to make strategic investment decisions in particular markets. When it comes to regional providers including Shaw Communications Inc., Quebecor Inc. and Bragg Communications Inc.’s Eastlink, McReynolds said one question is whether the internet of things would place smaller operators at a competitive disadvantage. In his report, McReynolds said the 5G rollout is at the core of a period of “real change” for the telecom industry in the next decade. But plenty of events still need to transpire before the deployment of 5G, which McReynolds expects to begin in 2021 and continue for several years. A 3.5 GHz frequency spectrum auction is set to be held this year, while a CRTC wireless review and a federal government decision on whether Huawei Technologies Co. Ltd equipment can be used are both expected before deployment can begin in earnest. McReynolds said no provider had a spectrum advantage in the medium to long term but Rogers’ significant investment in the 600, 700 and 850 MHz frequencies gave it “a low band advantage out of the gate”. Bell’s network sharing agreement with Telus and Inukshuk’s existing ownership of more than half the 3.5 GHz spectrum is likely to “turn down the temperature” of the upcoming auction, McReynolds said, but still predicted Bell, Rogers and Telus would each spend $1 billion. RBC models three financial cases for the wider sector over the next decade as it transitions to 5G, including a base scenario where revenue grows but at a slower rate than previous years. A huge spike in internet of things revenue powers the bull scenario to an annual growth rate of between four and six per cent over the next decade, while its bear case forecasts revenues dropping between one and two per cent.

Telecoms deadlocked ahead of 5G rollout: analyst

Brief | January 10, 2020

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Telecoms deadlocked ahead of 5G rollout: analyst

Brief | January 10, 2020

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