The Ratings Game: ‘The stars are aligning’ for Verizon to be a big 5G winner this fall, analyst says

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Verizon Communications Inc. might have a big advantage in 5G marketing after all at least in the near term.

That’s according to Lightshed Research analysts Walt Piecyk and Joe Galone, who wrote an upbeat note on Verizon’s VZ, +1.38% fall prospects Friday.

“[W]e recognize that the stars are aligning for it to once again lean heavily on its reputation as a superior network just as the COVID-induced, pent-up demand for smartphones is about to be unleashed,” they wrote. Apple Inc. AAPL, -1.35% is among the smartphone companies thought to be planning a 5G launch for the fall.

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Their optimism stems from what they think could be two game-changing technologies from Qualcomm Inc. One is Dynamic Spectrum Sharing (DSS), which lets operators move between 5G and LTE on the same spectrum block. Piecyk and Galone said this is helpful for wireless companies that don’t have enough “vacant spectrum” to dedicate only to 5G. The other technology is Carrier Aggregation, which they said will let carriers boost data speeds by combining various types of spectrum.

Taken together, these two technologies may help Verizon “actually deliver industry leading 5G speeds across a broad coverage area,” in their view, while AT&T Inc.’s T, +3.54% and T-Mobile US Inc.’s TMUS, +0.79% early data speeds may be less impressive because those companies are deploying 5G on a “thin” amount of spectrum.

“The phone reviewers are going to love it, especially relative to what we expect AT&T and T-Mobile to be offering at that time,” they wrote. “We believe this combination will produce a robust 5G coverage layer that Verizon will put marketing dollars behind.”

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Piecyk and Galone said the DSS and Carrier Aggregation technologies might just be “the best concoction since Gin and Tonic, as long as you are prepared for the hangover.” In Verizon’s case, that hangover may hit next year.

They worry that the company currently doesn’t have enough spectrum to meet its longer-term goals, while T-Mobile will soon be able to boost its network speeds once it deploys the Sprint spectrum it obtained through their merger. And the branding around new wireless technologies can change over time, as was seen with the 4G rollout, so the best performing option right away might not stay that way.

By Piecyk and Galone’s estimation, T-Mobile may have trouble broadly deploying that Sprint spectrum until 2021, but they said there’s still a chance that T-Mobile might start catching up this year. One way that could happen is if company leases spectrum from Dish Network Corp through an arrangement that could “double or triple the amount of spectrum T-Mobile is using for 5G” and “mitigate Verizon’s advantage” in the fall.

Some have been skeptical about Verizon’s 5G prospects as the company made a big bet on millimeter-wave spectrum, a type of spectrum more suited to dense urban areas, while peers took a more varied approach. Verizon’s initial forays with millimeter-wave 5G haven’t been stellar according to his tests, and though the analysts don’t expect the company to give up on this marketing, they predict the company will give its “big push” to the DSS and Carrier Aggregation version.

Verizon shares ended Friday up 1.4%. The stock has dropped 2.8% over the past three months as the Dow Jones Industrial Average DJIA, +2.99%, of which Verizon is a component, has lost 17%.

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