Financing the 5G Revolution

By Tony Wonfor, Managing Director, Greensill

I’ve been in the telecoms industry since the 1990s and have seen the industry evolve and develop at an incredible speed, but I’ve never seen anything like what 5G has in store for us. Rolling out 5G is a communications revolution that will profoundly change every aspect of our lives.

But before the world is 5G connected, many challenges must be overcome, not least securing the trillions of dollars of required investment.

Soaring costs

Initial estimates for 5G investment were somewhere between US$500 billion and US$1 trillion, but the latest analysis from Greensill, the world’s leading provider of working capital finance, reveals this will not cover the whole bill, because those estimates only include the expected costs to be incurred by telecoms carriers as they upgrade vital infrastructure.

5G isn’t just about telecoms and it’s not about faster internet.

5G is about everything — from cars and appliances to factories and hospitals — thereby requiring upgrades across the gamut.

With 5G’s exponential growth prospects, you can expect to see non-telecom companies (e.g. big data companies, car manufacturers, healthcare providers, construction companies and logistics specialists) enthusiastically participating in the 5G revolution.

Greensill’s estimate for the total bill for 5G roll out is likely to top US$2.7 trillion by the end of 2020 alone.

Pricing the IoT

Why so much?

Because spending on 5G roll out is just the thin end of the wedge. Higher costs come from funding the growth of the Internet of Things (IoT) and the necessary industrial connection that telecom and non-telecom companies require.

Our forecast shows around US$1.7 trillion of business and consumer investment is needed in the IoT, with the telecoms industry alone needing approximately US$1 trillion of investment for infrastructure upgrades to accommodate 5G.

ROI of the IoT

That spending (and the potential return) will be spread over 10 to 12 years, as opposed to six to eight years as was the case for 4G rollout. This is because of the higher levels of expenditure, as 5G requires more physical infrastructure to be installed.

Cost savings through partnering?

There are ways to reduce the costs via strategic partnerships that would both reduce the overall cost and ensure companies don’t double up on effort.

However, this will be very difficult to navigate given entrenched competitor and investor positions.

Mind the 5G funding gap

So, how will the US$2.7 trillion bill be paid? Traditional banks are probably the first to come to mind but because of capital regulations they will not be able to finance the full endeavour.

A revolution requires revolutionary thinking and Greensill has stepped up to the plate.

By harnessing the liquidity in the financial system through financial solutions like supply chain finance, accounts receivable finance, off-balance-sheet purchase facilities and other working capital innovations, we allow companies to grow. These solutions will be necessary to fill the inevitable funding gaps as 5G infrastructure spending and related industrial investment materialise.

Learn more about how Greensill is funding 5G in our latest whitepaper or email us direct at [email protected].

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