What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing today we're talking about 5g cellular communications technology, in addition to providing much faster download speeds to consumers, 5g promises to revolutionize the economy by making new internet Of things, applications and autonomous driving possible, currently more than 75 of the us population is covered by some form of 5g, and this is expected to increase to almost 100 percent within the next few years. The big three mobile carriers at t, verizon and t-mobile, have invested hundreds of billions of dollars to build out their national 5g networks, while all three companies are investing in 5g, their share price performance has differed significantly over the past five years. T-Mobile's share price has more than doubled, verizon has been about flat and t has lost more than 40 of its value. The stock market appears to think that t-mobile will be the winner in the 5g race and that's why they're being rewarded with a higher share price and price earnings.

Multiple in this video we'll look at the competitive positioning between the three major cell phone carriers and who will become the market leader in 5g. Roughly every 10 years, a new generation of telecommunications technology is developed which drastically improves performance and capabilities. The first generation or 1g was developed in the 1980s and powered the first brick-shaped mobile phones, 1g. Only supported calling in the 1990s 1g was replaced by 2g, which enabled texting an extremely slow internet connection, but for most practical purposes, the internet connectivity was pretty useless.

In the early 2000s we got 3g, which powered modern smartphones, such as the original iphone in 2009. We finally got 4g, which offers download speeds more than 6 times greater than 3g and finally, in 2020, many countries started rolling out 5g technology 5g promises to offer speeds of up to 20 times greater than 4g and also has much lower. Latency 5g will allow you to stream tv shows and youtube videos on your phone at much higher speeds, but the technology could be far more revolutionary than that. The fast internet speeds of 4g enabled the growth of social media companies like facebook, as well as gig economy, ecosystems like uber and lyft.

The faster speeds and lower latency of 5g can make decent technology, such as the internet of things and self-driving cars. A reality with high speed connectivity, your car, fridge and video game consoles could all communicate with each other to operate more efficiently. Industrial companies could use a low latency to allow engineers to operate machines using ar headsets from the other side of the world. Microsoft is beta.

Testing a product that would allow users to play xbox games on a mobile phone with 5g connection and perhaps most importantly, 5g, will also be a crucial enabler of autonomous vehicles. It will allow them to seamlessly communicate with centralized computer systems over the internet over the coming years. We could see new internet-based applications that we couldn't even imagine today, all powered on the back of 5g infrastructure. The big three cellular providers have some form of 5g, covering over 200 million americans today, but are these 5g networks good enough to live up to the hype as it stands now? America's 5g kind of sucks, according to data from open signal, the us's current 5g speeds are only about twice the speed of 4g, a far cry from the 20 times boost that many industry analysts had theorized.

In fact, america's 5g speeds are slower than the 4g speeds of south korea, canada and the netherlands, so why is us5g? So bad part of the reason is because of the large geographical size and low population density of the us. Both south korea and the netherlands are geographically small and have high population densities, while canada is large geographically, the vast majority of the population lives within a few highly populated metropolitan areas. Building a 5g network to cover the 3 million square miles of continental us is a much taller order. It's important to understand that not all 5g is created equal broadly speaking, there are three types of 5g low band, mid band and high band low band 5g.

Has a very wide range, with each tower being able to cover many miles, thus is by far the cheapest way to cover a large area. However, there is a trade-off between coverage and performance. Low band 5g offers download speeds not really any better than 4g lte highband. 5G offers the best performance.

This is the one that gives 20 times improvement over 4g. The problem is high. Band antennas only cover a very small area and costs a lot of money with current technology. It is only economical in major cities with extremely high population densities, while the vast majority of the u.s population is technically covered by some form of 5g.

Most of it is low band 5g that isn't even any better than 4g lte. This is why america's 5g speeds lag other countries, but this has been changing. All the major carriers are working on building out a mid mid-band 5g network. This is the sweet spot.

It provides enough performance to be significantly better than 4g lte, while at the same time being economically viable for most of the country. In 2019 and 2020, verizon focused on high band 5g in major cities at t focused on building both high band and low band infrastructure. T-Mobile was the only one that started building a mid-band network in 2019, currently their mid-band offering, which is branded as ultracapacity 5g, covers 200 million people by the end of 2020, both at t and verizon saw that their highband strategies were unsustainable if they wanted to stay Competitive with t-mobile, they would have to build their own mid-band networks, but why they let t-mobile build up such a lead in mid-band 5g. In the first place, it all comes down to spectrum cell phone signals are transmitted through electromagnetic rays of varying wavelengths.

Two cell phone carriers cannot operate on the same bandwidth of spectrum as their signals would interfere with each other. The federal communications commission auctions off specific bandwidths of spectrum to telecommunications companies, so they can have the exclusive rights to operate on them before 2019. None of the major carriers had sufficient bandwidth rights to build out a national mid-band 5g network, but there was one company that did have this sprint, which was the 4th largest cell phone carrier at the time, happened to own the rights to 2.5 gigahertz spectrum, which was Very favorable for building mid-band 5g, the problem was sprint, was heavily indebted and they lacked the skill to build a 5g network on their own. Their valuable spectrum assets were just sitting in a filing cabinet collecting dust because of this t-mobile agreed to acquire sprint in 2018.

For 26 billion dollars, sprint's business and brand were dying, but from t-mobile's perspective, the 26 billion price tag was a steal just to get the spectrum rights after the deal was announced, multiple state attorney generals sued to block the deal on anti-trust grounds after two long years Of legal battles, a federal judge finally approved the merger in early 2020. At the time, both at t and verizon were far bigger than t-mobile in terms of the wireless market share. Given that t-mobile was barely able to close the deal at t or verizon, almost certainly wouldn't have been allowed to, so t-mobile ended up being the only bidder and they were consequently able to buy sprint for a very cheap price. This gave them a massive head start.

After the deal closed, they immediately started rolling out their mid-band 5g network, which now covers more than 200 million americans going into 2021. T-Mobile was miles ahead of at t and verizon. They already had tens of millions of customers across the u.s using their mid band 5g, which is far superior to 4g lte t-mobile stock price was also massively outperforming their competitors. It seemed as though the stock market had already crowned them as the victor of the 5g race, but verizon and atnt weren't going to go down without a fight.

In february of 2021, the federal communications commission conducted a spectrum auction to sell bandwidth favorable for mid-band 5g verizon spent 45 billion dollars and att spent 23 billion dollars to acquire a new spectrum. Over the past year. Both companies have been firing on all cylinders to build out their own mid-band networks to close the gap with t-mobile t-mobile got lucky in their ability to acquire sprint. This gave them more than a year of a head start, but there's no reason to believe that at t and verizon won't be able to catch up.

They've proved that they're serious about 5g by spending, a combined 70 billion on spectrum and they'll spend tens of billions. More in the coming years, on 5g infrastructure soon, the vast majority of americans will live in an area that has 5g coverage from at least two of the three major carriers. This chart shows the number of retail cell phone customers on the big three carriers. Currently verizon has the biggest market share with 90 million customers.

18C comes in second, with 80 million and t-mobile comes in third, with 70 million sprint's former customers were added to t-mobile's customer account to maintain comparability. The three companies report their customer metrics slightly differently, but this should be a pretty good approximation of their relative positions. All of them have grown over the past five years, but t-mobile has grown the fastest. This has allowed them to grow their percentage of market share by four points from 25 in 2016 to 29 today.

So, while their 5g head start has certainly benefited them, this benefit was pretty modest. While this video is not financial advice, the more than 100 out performance of t-mobile stock seems kind of hard to justify. They've only gained a few percent of market share, despite having a head start on mid band 5g, once atnc and verizon get their mid-band networks up and running over the next year or so t-mobile's ability to continue taking shares should decrease drastically at the time of recording This video t-mobile has a forward price earnings ratio of 37 times. This is orders of magnitude higher than the 7.6 for at t and 9.8 for verizon.

Based on these numbers, t-mobile appears to be extremely overvalued with any advantage they have in 5g, already more than reflected in the current share price. The story with at t is a bit more complicated because they also own warner media, which they plan to spin off. If you want to see a more detailed analysis of this, we made a video on it link in the description below alright guys that wraps it up for this video. What do you think about t-mobile? Do you think their leadership in 5g can be sustained? Let us know in the comments section below as always.

Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.