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Verizon Remains Committed to Fiber and 5G

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Verizon’s 5G strategy

Verizon’s (VZ) progress in the 5G (fifth-generation) space continues. The company believes it will be the first major US carrier to deploy 5G on its network. It probably won’t happen until the end of 2017 and only as a fixed wireless broadband solution. Verizon is working on its 5G initiative with Cisco Systems (CSCO), Nokia (NOK), Ericsson (ERIC), Intel (INTC), and Samsung (SSNLF).

During Verizon’s 4Q16 earnings conference call, management told investors that the company is launching ten pre-commercial 5G pilots across the United States, bringing it one step closer to a commercial launch.

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Earlier in 2016, Verizon acquired XO Communications for $1.8 billion. XO Communications will provide Verizon with fiber-optic networks in 40 major US markets. The pending acquisition will help support Verizon’s services for enterprise and wholesale customers and enable it to continue to densify its wireless cell network to enhance its 4G (fourth-generation) LTE (Long-Term Evolution) coverage and provide the basics for an eventual 5G wireless rollout.

AT&T could be another aggressive player in 5G market

In addition to Verizon, AT&T has also been an aggressive player in the 5G market. In the past, it has tried to outbid its rivals in order to gain spectrum advantage.

AT&T (T) was the highest bidder during the AWS-3 spectrum auctions in early 2015 and purchased spectrum worth $18.2 billion. The AWS-3 spectrum auction was the major auction conducted by the FCC (Federal Communications Commission) after 2008. As you can see in the above graph, Verizon and T-Mobile (TMUS) also participated in that auction and made winning bids of $10.4 billion and $1.8 billion, respectively.

AT&T’s proposed acquisition of Time Warner (TWX) will help AT&T lower its capex (capital expenditure) investments, with minimal capex requirements at Time Warner balancing AT&T’s higher capex needs. As a result, AT&T will have more resources and opportunities to invest in 5G technology.

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