According to CISCO, the number of  connected devices will number around 30 billion by 2022, an additional 10 billion devices in just five years. While 4G was a transformational step in mobile technology, it was never designed to handle so many devices, and as a result, the user experience on 4G networks in many areas has started to degrade. Projected growth in connected devices will further exacerbate the situation.

 

Looking forward, the introduction of 5G offers significant advantages over 4G. In terms of capacity, 5G technology has the potential to connect at least one million devices per km2 compared to one hundred thousand wireless devices per km2 for 4G. 5G also boasts increased through-put speeds (1GB per second to 20GB per second), reduced latency and reduced energy requirements resulting in reduced cost. On a macro level, the applications of 5G are expected to include the following categories, among others:

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• Entertainment – lightning-fast HD

• video downloads and streaming, plus Virtual Reality and AR;

• Internet of Things – connection of appliances, devices and sensors in smart cities;

• Healthcare – real-time monitoring of people’s health, remote use of medical equipment;

• Transport – communication for self-driving vehicles, smart traffic lights and signs.

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5G networks and services will be de-ployed in stages, with different carriers adopting varied strategies in large part dictated by their spectrum assets. In many areas, 5G will first be used for fixed wireless applications: residential and branch backhaul.

 

Deployment started in mid-2019 continuing through 2020, with service providers offering 5G services in select cities. Around 2021, a 5G service will be commonplace in many large cities in the USA, EMEA, Japan, and China, with important rollouts lasting through to at least 2023. 5G is also expected to be deployed outside of cities, and select carriers have already begun these deployments in the USA using low-band  spectrum on a nationwide basis. Ultimately, 5G is expected to occupy much the same footprint as 4G does today.

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Dan Schlanger, CFO at Crown Castle explains, “As has been the case for well over a de-cade, the market for shared communications infrastructure in the USA remains robust. With mobile data demand growing at 30-40% per year, wireless operators are adding capacity to their networks by actively de-ploying new spectrum and densifying their 4G networks utilizing both macro sites and small cells. At the same time, the industry is in the very early stages of 5G deployments that we believe will add to the long runway of demand for shared tower and small cell infrastructure in  the USA.”

 

He continues: “By delivering dramatic network performance improvements, including a significant increase in capacity with faster data speeds and lower latency, 5G has the potential to enable new use cases that would drive even greater increases in mobile data demand. Towers, small cells and fiber will all play a critical role in delivering on the promise of 5G. We believe our unique portfolio of towers, small cells and fiber positions us take advantage of the same demand drivers, customer base and value proposition that has made the US tower industry so successful. With these positive long-term growth trends driving demand for our infrastructure, we are excited about the opportunity to deliver compelling total returns for our shareholders.”

Smartphones are fast becoming the ‘communications hub’ for social media, video consumption, tracking IOT/digitization applications as well as traditional voice calls. It is forecasted that they will represent 44% of global IP traffic by 2022 (up from 18% in 2017) and mobile data traffic will grow nearly twice as fast as fixed IP traffic through 2022.

 

What’s clear is the necessity of denser networks of tower infrastructure (macro sites) and small cells (micro sites) to meet increasing data consumption – whether 4G or 5G. In this example, wire-less congestion occurs when too many people try to use the same cell site at the same time. Coupled with increased data usage, all that extra demand can quickly overload a cell site’s capacity. Naturally, the best way to relieve congestion is to add new telecom infrastructure. This can be in the form of macro cell sites like towers, plus additional small cells that add more capacity in high-traffic ur-ban areas, like in a busy market or sports arena. In rural and suburban areas, as well as along roadways, operators can handle increased traffic simply by densifying existing macro site networks.

 

In the mid-term, significant 4G investments are expected to continue. The graphic below shows that in the USA, 4G densification and investment will be needed to support data growth despite the introduction of 5G. In fact, 4G is expected to maintain a 50% market share through 2025.  

 

While 5G is grabbing most of the head-lines, there are regions in the world where 3G and 4G networks are just now being deployed. The secular drivers of wireless data demand in developing economies are following a similar path that was created in more advanced economies over the past ten years.

 

The chance to participate in this long runway of growth is one of the factors that attracted SBA Communications and other tower companies to the Latin American tower market. CISCO estimate that Middle East and Africa will have the strongest mobile data growth of any region from 2017 to 2022, with 56% CAGR followed by Asia Pacific (49%) and LATAM (43%).

 

"After the tremendous success we’ve experienced in the USA due to the significant growth in mobile wireless data consumption and the transition from 2G to 3G to 4G, we saw the same opportunity profile developing in Central and South America,” comments Brendan Cavanagh, Chief Financial Officer of SBA. “Our markets throughout Latin America are quickly following the development cycles we’ve seen in the USA, and we expect them to be material drivers of growth for our company and industry for years  to come.”