Will Verizon (VZ) Lead In 5G With Small Cell & Dark Fiber?

U.S .telecom behemoth Verizon Communications Inc. (NYSE:VZ) is emphasizing on its upcoming 5G fixed wireless network to counter rising competition in the domestic wireless market. The industry is already working on 5G to reap maximum benefits from it.

Other U.S. telecom behemoths –Sprint Corp. (NYSE:S) , T-Mobile US (NYSE:T) and AT&T Inc. (NYSE:T) – are all moving ahead with their plans and aim to launch their 5G networks in the upcoming years. They have either tested or are in the process of testing 5G technology.

However, Verizon seems to have the lead as evident from its plans to launch its 5G services initially in small towns in the first quarter of 2017. The company claims that its small cell densification and expansion of its dark fiber footprint strategy will help it to have a competitive edge over others. To this end, Verizon is engaged in reframing spectrum, using updated technology like C-RAN (CloudRAN or Centralized RAN), massive MIMO (Multiple Input Multiple Output) and carrier aggregation.

Further, Verizon has been focusing on improving its terms with the municipalities as it is one of the core requirements to build out dense small cell networks. Additionally, the recent approval from the U.S. telecom regulator, Federal Communications Commission (FCC) for the $1.8 billion deal to purchase XO Communications Inc.’s fiber-optic network also bodes well for the company. Notably, the FCC had allowed Verizon to enter a lease to use XO Communications’ wireless spectrum licenses for 5G deployment.

This XO deal is expected to expand Verizon’s metro and on-net fiber as well as millimeter wave wireless spectrum holdings in several major markets. XO Communications operates as a fiber-based IP and Ethernet network consisting of 20,000 route mile intercity network in the U.S. and Canada. The XO Communications acquisition will help Verizon serve three of its main domains: business services, consumer FiOS and as a backhaul for its upcoming 5G wireless services. In addition, XO Communications’ fiber assets will allow the company to enhance its dark fiber-based solutions for its small cell network. The densification of cell network will help the company to install and build its upcoming 5G network. Meanwhile, Sprint is also strengthening its dark fiber-network for small cell wireless backhaul.

The increase in the adoption of small cells is because of the inconvenience of installing large towers in inaccessible areas. Verizon stated that the small cells will be used to augment its existing 4G LTE and upcoming 5G network and will primarily concentrate on high traffic locations like a business district or a shopping mall. Verizon expects that the small cells will increase its voice capacity and data speeds and will complement its current LTE infrastructure. However, providing emergency power backup remains a major headwind for small cells.

Price Performance

Shares of Verizon have had a moderate run so far in the current year. Year to date, Verizon has gained 11.16% but lagged the Zacks categorized U.S. wireless national industry's growth of 19.94%.

Verizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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