Fifth generation telecommunications network technology, or 5G, requires large capital backing from telecom firms to realize its full potential.
JP Morgan in a recent announcement said that it is “too early” for the impact of 5G to materially factor into analysts’ forecasts, based on growing concerns from the Asia Pacific telecom sector, which performed poorly last year, despite investing into the new tech.
The international bank’s analysts said that some telecommunications stocks did not perform as well as they could have last year, due to the minimal adoption of next-generation telecom networks, or 5G, in which the respective companies had invested in.
The analysts also said that they have found “depressed valuation” for Chinese, Japanese, South Korean and Australian telecommunications stocks. Those markets are likely to be the first in the region to implement 5G, according to the JP Morgan.
All told, companies in the Asian telecom sector underperformed the MSCI Asia Index by 18 percent in the past 12 months to April 2018, the experts said.
JP Morgan dismissed 5G concerns as coming “too early” and said many telecom stocks could be showing a disconnect between their current price and their actual value, as the bank is aware of the large capital moved into the new telecom tech sector, even if the market and consumers cannot yet realize it.
James Sullivan, head of Asia ex-Japan equity research at J.P. Morgan, told CNBC that the media attention being paid to 5G is significantly outpacing the technology’s impact in the real world. Many of its uses are still theoretical because complementary technologies don’t really exist yet.
“It’s not really about faster download speeds,” he said. “It’s about the internet of things (IoT), autonomous vehicles and things of that nature for which no one understands a monetization case for networks yet.”
5G networks are the underlying technology to support the vision behind the machine-to-machine economy, and the Internet Of Things (IoT), as they are tailored for faster data speeds.