Tring Tring! The new G has emerged in the telecom landscape

  • Jun 23, 2020 NZST
  • Team Kalkine
Tring Tring! The new G has emerged in the telecom landscape

Summary

  • 5G has opened doors to life-changing innovations with faster speed, low latency and higher bandwidth.
  • Various telecom operators are appraising and investing substantially in 5G technology because of the relevance and potential of 5G in various industrial applications
  • COVID-19 prevented a Mid-band spectrum auction to be held in May, leading to direct allocation of spectrum with Spark and 2 Degrees Mobile being offered 60 MHz, and Dense Air was offered 40 MHz.

The world is experiencing another pivotal digital transformation phase as artificial intelligence, the Internet of Things (IoT), and augmented reality are evolving from mere buzz words to reality and forming the basis for long-term economic capability.

The stimulant for this economic growth is the connectivity enabled by 5G.

When 4G was launched a couple of years ago, it changed the way people used to consume information such as video streaming, sharing rides, food delivery and more. 5G has taken the connectivity and speed to a different level and has the capability to virtually connect machines, objects, and devices, all together. Application of 5G enables and enhances extreme reality (XR), IoT capabilities, instant cloud access and much more.

But how is this connection possible? What about its speed? What is 5G offering?

One might say that 5G is an extension of 4G, or it is a faster wireless capability. However, 5G is much more than a mere extension of 4G. 5G is revolutionising telecommunications.

The speed and coverage capability of 5G requires denser network, requiring addition of more number of towers and small cells to the network.

The technological shift to 5G is likely to soar opportunities digitally, leading to introduction of new products and services and higher efficiencies in productivity across verticals in the telecommunication industry.

Indeed, 5G connectivity will lead various stakeholders; consumers, industries, and governments to reach new parameters of productivity and innovation.

5G furnishing varied service requirements

  • Enhanced Mobile Broadband will enable deployment of data-intensive cases such as Augmented Reality (AR) and Virtual Reality (VR), 3-D Video, 4K screens and cloud.
  • Low-Latency Communications, when reinforced with secure network infrastructure, 5G is expected to support services such as autonomous vehicles, drones application, robotics, real-time industry applications and tele-health.
  • Enhanced IoT capabilities: 5G allows greater network connectivity in dense urban areas and improves connectivity and operational capabilities for devices/sensors leading to its applications in new industry verticals that are in making such as smart cities, logistics, industrial applications and automation in Agriculture.

With its array of potential, 5G will influence everything that we do.

Today building and utilising 5G has become one of the strategic priorities for Telecom operators, creating immense opportunities for revenue generation in fixed broadband and various businesses.

Let us get the ball rolling and dive into the New Zealand telecom space.

The tale of gigantic telecommunications industry of New Zealand and 5G

The telecommunication sector is gigantic and has numerous operators such as Spark, Vodafone New Zealand, 2 Degrees Mobile catering to the varied customer base by providing a mix of both fixed as well mobile services along with other services like Pay TV, cloud computing and more.

New Zealand is pacing towards 5G readiness and amid COVID-19, government has decided not to conducted any auction for the spectrum and will be following a direct allocation process of 5G spectrum in the 3.5 GHz band at a low, fixed cost of NZ$ 0.25 Million per 10 MHz of bandwidth.

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Spark NZ was offered a spectrum of 60 megahertz (MHz) of 3.5 GHz (or C Band), 2 Degrees Mobile was also offered 60 MHz, and Dense Air was offered 40 MHz. However, Vodafone New Zealand was not allocated any spectrum by the government as it already has ~ 60 MHz of 3.5 GHz of spectrum.

Let’s dig deeper on few telecom companies.

Spark New Zealand Limited

Spark New Zealand offers telecommunications and digital services including mobile, fixed, internet, pay television and cloud computing.

On 28 May 2020, Telecommunications company, Spark New Zealand Limited (NZX:SPK) priced an issue of AU$100 million 6-year fixed-rate bonds, maturing on 5 June 2026 under its existing Australian debt issuance programme. The funds are expected to be utilised for refinancing debt maturities and other general corporate purposes. Also, this issue has been swapped into NZD, which equated to NZ$106.8 million.

On 12 May 2020, Spark NZ welcomed spectrum allocation; preparations underway for 5G rollout over 12 months. Spark NZ was offered 5G spectrum of 60 MHz of 3.5 GHz (or C Band) enabling the Company to proceed with their planned 5G rollout at pace.

 

Source: NZX Announcement

Source: NZX Announcement

 

The Company noted a robust business performance during the H1 FY’20 ending 31 December 2020 and reaffirmed its FY20 guidance.

 

FY20 Guidance (Source: SPK Announcement)

 FY20 Guidance (Source: SPK Announcement)

 

The Company added that no business is immune to Covid-19 and its impacts will be unfolded in the final quarter of FY’20, thus moderating the impact of the pandemic during FY’20.

Further, SPK noted a considerable reduction in the high-margin roaming services, primarily due to travel restrictions and border closures, constituting ~5% of SPK’s total mobile revenue.

The Company witnessed a drastic increase in broadband usage. However, it did not charge any additional amount from the customers who are on data capped plans, waived late payment fees and disconnections due to financial support package adopted to combat the crisis.

Additional funding accessed

In early April, the Company had secured two revolving credit facilities with two bankers; inclusive of NZ$75 million each, maturing on 2 October 2022. Further, the proceeds were utilised to refinance the notes worth £18 million, which were due on 6 April 2020.

In late March, the Company extended the term of its standby revolving credit facilities worth NZ$200 million by 1 year, now maturing on 30 April 2023.

On 23 June 2020, SPK is trading at NZ$4.430 (3:33 pm NZST).

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Telstra Corporation Limited (NZX:TLS),

Telstra Corporation Limited got listed on NZX in 1997. TLS offers telecommunications and information services such as mobile, internet, fixed and pay television.

5G and its tales

In Late May, Telstra announced that over 700 suburbs across Australia have more than 50 per cent of 5G coverage and on 13 May 2020, TLS announced the expansion of its 5G coverage into more of Tasmania and Melbourne. TLS’ 5G rollout has accelerated with more than 50% coverage to around 600 suburban regions across Australia.

The Company is focused on continuous expansion of its 5G coverage, as it believes that 2020 will be the year for 5G.

Foxtel Impairment

In early May, Telstra announced that it expects to make non-cash impairment charges of ~AU$ 300 million and write down of carrying value of its 35% stake in Foxtel. This is expected to write down the value of Telstra’s share in Foxtel from AU$750 million to around AU$450 million subject to the Board review and approval of the FY20 results.

Other updates

In April, Telstra priced ~AU$860 million bond issue, strengthening the balance sheet.

Also, Telstra paid interim dividend worth AU$951 million to its shareholders during the week commencing 23 March 2020.

During mid-March 2020, TLS provided its business update in relation with COVID-19 and announced several initiatives such as further job reductions on hold for over six months, made thousands of temporary recruitments, provided unlimited data to its home and small business broadband customers and extra data was provided to mobile customers.

Moreover, TLS bought forward capex of AU$500 million from the second half of FY21 into calendar year 2020, to increase network capacity and speed up 5Groll out.

On 23 June 2020, TLS is trading at NZ$ 3.410 (3:33 pm NZST)

 


Disclaimer
The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.

 

   
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