Wireless companies have made significant investments in 5G wireless networks, but investors are not seeing a return on these investments as expected. Senior Equity Analyst at CFRA Research Keith Snyder discusses why 5G did not have the impact wireless companies had hoped for.

Snyder notes that these days providing connectivity alone is not enough: in the past, 4G connectivity was a significant selling point, but with more competitors entering the market, it has now become "a services game" for wireless companies. Snyder emphasizes that companies will have to show customers "what they can offer" alongside redefining their business models because "people didn't care about 5G" in itself.

Snyder points out that companies have tried to monetize 5G by offering services on top of their wireline broadband businesses. However, companies like AT&T (T) and Verizon (VZ), which already have pre-existing broadband businesses, "have to be really careful" about which markets they introduce these services in. The approach could also lead to "a congestion issue," with many customers using the same connectivity in the same markets.

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Editor's note: This article was written by Angel Smith

Video Transcript

JOSH LIPTON: Wireless companies have been piling hundreds of billions of dollars into 5G infrastructure in the US over the last few years but haven't really been reaping the benefits so far. But it seems that 2020 may be the year that things seem to change, at least for a few telecom giants, according to our next guest. Joining us now is Keith Schneider, CFRA Research Senior Equity Analyst.

Keith, it is good to see you. So it's interesting, Keith, your point is that, listen, these wireless companies, we know they've dedicated a lot of time and effort and a whole lot of money to 5G, Keith, but they haven't really monetized that yet, at least in any kind of meaningful way. Maybe to start, Keith, I'm just interested, why is that? What are the hurdles here that you would outline, both on consumer and enterprise?

KEITH SNYDER: Sure. I mean, this is kind of the first generation that we've seen that just providing connectivity services isn't enough. So looking back at 4G LTE, 4G, 3G, just being able to connect people to each other, that was good enough for wireless companies.

With 5G, you have so many other alternatives. You have Wi-Fi 6. You have satellite internet coming out with Starlink. And Amazon's planning a big network. You have competition from all sides. And so now it's become a services game. And really, what we're seeing is these companies are going to need to, one, communicate to customers what they can offer. But, two, really redefine their business model as on the consumer side especially.