23 Mar Warren Buffett’s 5G interest could signal sea change | Light Reading
The Oracle of Omaha appears to believe in 5G.
And some think his widening financial portfolio in the space could be part of a broader shift among big-name investors toward the communications industry in general.
“Telecom is becoming a focus of the investment community because it has not had the price appreciation of other assets,” argued Jim Patterson of Patterson Advisory Group in his weekly newsletter. “As networks evolve [to 5G], opportunities to create value emerge. Hence the recent interest.”
As noted by Yahoo Finance, billionaire investor Warren Buffett is the fifth wealthiest person in the world and is often referred to as the “Oracle from Omaha” due to his career of well-timed financial investments. Buffet recently snapped up 147 million Verizon shares worth around $8 billion. Buffett also recently raised his stake in T-Mobile to around $706 million, from a previous $276 million holding last year.
Buffett isn’t the only big-name investor to move more heavily into the 5G and telecom space. As Patterson noted, Elliott Management recently returned to AT&T as an investor, albeit a minor one. And billionaire Nelson Pelz, through his Trian Partners investment firm, recently upped his stake in Comcast beyond $1 billion.
A new 5G investment trend
Those in the wireless industry are certainly taking note.
“He [Buffett] sees the value of this sector,” T-Mobile CEO Mike Sievert told Yahoo Finance. “This sector is valuable.”
Sievert’s comments to Yahoo Finance were part of his media tour last week following T-Mobile’s analyst event, where the company promised up to $60 billion in share buybacks by 2025.
“That’s a great opportunity for investors,” Sievert said of T-Mobile’s plans to generate cash. He also strongly encouraged investors to consider T-Mobile specifically in the 5G sector. “If you don’t want your investment diluted by a lot of other businesses that are less valuable, and you want to invest with the company with the best asset base for 5G, well that’s T-Mobile.”
Others agree that 5G, in general, is something that big-name investors should consider. “5G is part of the bigger movement of the Internet of Things and digitization as everything moves to edge [computing],” former Cisco CEO John Chambers told Yahoo Finance. Chambers now leads his VC firm JC2 Ventures.
“There are more new investors coming into the telecom space,” agreed Patterson in comments to Light Reading. Investors are looking for growth stocks, and he said that the telecom industry, in general, may well be poised for growth.
Indeed, Verizon expects its 5G efforts to help grow its overall corporate revenues by 4% or more by 2024, up from the 2% growth it expects this year.
The real question though, according to Patterson, is “what is Warren Buffett thinking?”
Finding the investment value in 5G
Patterson who makes clear that he’s not a “stock picker” said it’s unclear whether Buffett sees a general rise in economic activity around 5G or if he’s specifically interested in something at Verizon and T-Mobile.
The financial analysts at New Street Research suggested that the FCC’s record-breaking C-band spectrum auction which ended with a total of roughly $81 billion in bids, primarily from Verizon, AT&T and T-Mobile is certainly a catalyst for the 5G space. But in a recent note to investors, they argued that it’s still not clear exactly how the operators will justify their eye-watering investment into C-band spectrum for 5G.
“The wireless carriers will all point to the fixed broadband market as an incremental revenue opportunity, but this is nonsense,” they wrote. “The entire fixed broadband market is half the size of the wireless market, and the prospect of households taking a slower, less reliable wireless alternative to fiber or cable has diminished over the course of the last year.”
Another possibly more compelling opportunity may be in the private wireless networking space, the analysts wrote. After all, operators like Verizon and AT&T have been hard at work in their attempts to sell purpose-built 5G networks and services to large enterprises.
“If there is an opportunity, it is in the much-discussed but ever so hard to quantify enterprise private network market,” wrote the New Street analysts. “The idea is that enterprises will need secure, private networks, customized for their needs, to support a slew of new enterprise applications that don’t exist today. We believe this market will exist, but because we have no way of knowing whether it will be a $10 billion opportunity or a $10 trillion opportunity, it is difficult for us or the market to give carriers credit for it today.”
Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano
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