Vital though the new U.S. mid-band spectrum for 5G might be, the cost of acquiring rights to use the spectrum worries financial analysts. S&P Global, for example, says spending on the C-band spectrum is “excessive.”
To pay for the licenses, U.S. mobile operator capital expenditure will be higher, also likely resulting in lower levels of free operating cash flow and higher leverage.
At the same time, mobile operators will be tempted to promote aggressively to gain 5G share, risking higher levels of customer churn and profit margin compression as well. At least in the near term, new competition from Dish Network and continued gains by cable operators will limit top-line revenue growth.
On the other hand, if you could choose the segment of the business one were in, most would prefer life as a cable operator. Cable will see revenue growth of about six percent over the next two years, with steady increases in cash flow.
For legacy telcos, mobility would still be the top choice. Mobile revenue top-line is projected to grow at perhaps 2.5 percent over the next couple of years, according to S&P Global.
Fixed network revenue growth will be negative over the next couple of years, with business revenue the bright spot, perhaps growing half a percent by 2022, with consumer revenues down four percent per year.
The satellite industry might face some overcapacity issues once the low earth orbit constellations go fully commercial. And while there are variations, the data center and mobile tower segments should generally fare well, S&P says.
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