The 5G revolution provides an opportunity for communication infrastructure operators and investors.

With data usage projected to increase over five-fold by 2025, communications infrastructure will require significant enhancement in order to support the data explosion.

In AMP Capital’s latest paper on communications infrastructure, Giuseppe Corona, Head of Global Listed Infrastructure, and Jason Aront, Portfolio Manager, focus on 5G, exploring the history of telecommunications networks from 0 to 5G, explaining the current wireless infrastructure landscape and the technology behind the new generation’s development, and identifying investment opportunities in the 5G rollout.

Revolutionary technologies continue to fundamentally change the way we live our lives, with the new revolution led by the internet of things, smart cities, artificial intelligence, autonomous vehicles, remote computing and virtual reality.

By 2020, the number of connected devices is expected to reach 50 billion according to Cisco, which is four times the number in 2010. Whilst 4G was a transformational step in mobile technology, it was never designed to handle so many devices and as a result the network has become slower and more congested. This situation is only getting worse as ever more devices are getting connected, and therefore 5G is slated to be the solution for many years to come.

In order to deliver a faster, denser and more reliable mobile network, 5G will utilise various technologies and communication techniques working together in a seamless way, meaning the transition from 4G won’t be instantaneous. Governments understand the imperative of facilitating the path to 5G and bringing together the relevant expertise to make it happen.

The move to 5G technology is expected to have a significant economic, social and environmental impact on our lives. Enabling improved mobile broadband, massive machine-type connectivity and very reliable and low latency communication, 5G technology will be embraced in areas as diverse as transportation, the home, healthcare and entertainment.

This paper focusses on the defining characteristics and technologies behind 5G and what makes the new generation of communications revolutionary in enabling the applications of the future. We also look at the infrastructure requirements for 5G and the need for macro cell sites, small cells and fibre to work seamlessly in an integrated network in order to deliver the full benefits of 5G.

The opportunities for infrastructure investors

Towers businesses: Mobile service carriers have historically owned their own communication infrastructure (specifically macro towers) and considered them strategic, as they enabled a true differentiation of network performance. But in recent years, an independent tower operator model has emerged. Under this model, a tower operator offers long-term leases to carriers, the price of which tends to increase annually by the rate of inflation. These tower companies host equipment from multiple carriers and therefore can provide coverage on a much more cost-effective basis than a carrier could; independent tower operators can have over four carriers on one tower, which compares to just one tenant for towers owned by carriers. Adding an additional tenant results in only a small marginal increase in operating costs and therefore this business model has very attractive operational leverage.

Whilst the US has led the way in terms of this model, the rest of the world is following as carriers around the world sell towers in order to reduce capex needs and improve their profitability and balance sheet by monetising these assets, which are much more valuable in an independent operator’s hands than their own. US tower companies, and now their European peers, are growing their independent tower operator business model internationally.

The 5G revolution provides an opportunity for communication infrastructure operators and investors, given the requirements of upgrading towers and densifying the network through fibre and small cells, to meet ever-growing demand for connectivity.

The post 5G – Download the Revolution appeared first on AdviserVoice.

Michel Debs has been appointed as a Portfolio Manager/Analyst on AMP Capital’s Global Listed Infrastructure team.  Based in London, he will be responsible for covering utilities infrastructure across Europe and Asia.

With a decade’s sell-side equity research experience, Mr Debs joins from Citi where he was most recently a Director on the Utilities research team, responsible for the coverage of multinational energy providers. Prior to this, he was a Vice-President at Credit Suisse on the Utilities research team, specialising in French utilities companies.  In each of these roles he received prestigious Starmine awards for stockpicking and earnings estimation.

Mr Debs began his career at PwC in accounting and also worked at KPMG, before moving to Credit Suisse as a quantitative research associate in 2008.

The appointment reflects the continued growth of AMP Capital’s real assets business.

AMP Capital’s Head of Global Listed Infrastructure, Giuseppe Corona, said: “Michel’s appointment brings valuable utilities sector knowledge and skills to the existing expertise on the Global Listed Infrastructure team. We are excited to welcome him to our team.

“It is increasingly vital for listed infrastructure investors to build a strong, deep and specialised investment team to analyse the investable universe and seek out the most attractive investment opportunities. Investors around the world are continuing to increase their allocation to infrastructure. AMP Capital’s Global Listed Infrastructure strategy makes this highly-attractive defensive asset class, typically accessed through direct investment, available to a wide range of investors.

“Investors can access stable returns from a range of investment opportunities in infrastructure, while benefiting from the diversification and liquidity that the listed approach provides.”

AMP Capital’s Global Listed Infrastructure team now comprises six senior investment professionals, located in London and Sydney.

The post AMP Capital strengthens global listed infrastructure capability with new London hire appeared first on AdviserVoice.

AMP Capital’s latest whitepaper, “Not Just a Bond Proxy”.

Sovereign yields around the world are rising off the back of rising inflation expectations and political events such as the election of President Trump in the US but rising interest rates don’t correlate to lower returns for infrastructure stocks, says AMP Capital.

According to AMP Capital’s latest whitepaper, Not Just a Bond Proxy, this rising yields environment causes a market overreaction, which results in short-term underperformance of global listed infrastructure stocks compared to global equities. However, it is an overreaction that belies the asset class’s true characteristics and the recovery that has followed every rate rise in the business cycle since the Global Financial Crisis (GFC).

The new research shows the average performance of listed infrastructure during periods of rising yields is 0.9 per cent, compared to 10.3 per cent for global equities. Listed infrastructure, however, recovered after each of these periods of rising yields, outperforming global equities by around 10 per cent during the following 12 months.

AMP Capital Head of Global Listed Infrastructure Giuseppe Corona said: “Each meaningful increase in sovereign yields since the GFC, including the Taper tantrum in 2013 and the Bund tantrum in 2015, saw global listed infrastructure underperform global equities on a short-term basis before recovering all of that relative underperformance in the 12 months following.

“What this shows is a market overreaction to a rising yields environment. A strong correlation between the performance of global listed infrastructure and its cashflow growth shows investors should focus on the underlying assets and their ability to generate visible and growing cashflows, and not be spooked by the dramatics of short-term market moves.

“Furthermore, the impact of rising yields should also be taken in the context of listed infrastructure’s sector diversification. Sectors such as utilities, communication, transportation and oil and gas storage transportation are not affected by changes to interest rates in the same way so investors can mitigate risk arising from macro factors such as interest rates.”

One such example is communications infrastructure companies, which are typically very sensitive to interest rate changes on account of their long duration and above-average financial leverage. With mobile data traffic growing 4,000 times during the past ten years and projected to grow at 53 per cent compound annual growth rate between 2015 and 2020, with speeds of 5G and higher in the future, exposure to this secular growth thematic partially offsets the impact of rising rates.

Similarly, in oil and gas, rising world population growth is expected to reach 9.1 billion by 2040, mainly driven by India and some African countries such as Nigeria, driving an increase in global energy consumption. Increasing living standards will push billions of people to drive more vehicles and consume more electricity to power their home appliances, which continues to support new investments in pipelines and storage assets. The International Energy Agency expects US natural gas production to increase at an annual rate of 4 per cent for the remainder of the decade.

AMP Capital’s paper emphasises the importance of differentiating between the short-term volatility of equity prices and the long-term stability of cash flows.

“Investors should always focus on the underlying assets and their ability to generate visible and growing cashflows because of the strong correlation between the long-term performance of the asset class and its cashflow growth. Having said that, volatility that comes with short-term increases in interest rates can present a buying opportunity for savvy investors to capitalise on the dislocation between value and price,” Mr Corona said.

Read the full white paper.

The post AMP Capital shows global listed infrastructure is not just a bond proxy as sovereign yields rise around the world appeared first on AdviserVoice.