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Optus to launch 5G next year

Optus has announced that it will launch its 5G network in 2019. This could be embarrassing for Telstra Corporation Ltd (ASX: TLS) if its competitor brings the next generation of telecommunications to the market before the Aussie giant.

5G is touted as being able to offer speeds that are 15 times quicker than the current 4G. According to Optus, it had managed to achieve speeds of up to two gigabits per second, which is around at least 20 times faster than what most people’s fastest NBN connection can achieve.

Many people have speculated that households will no longer need a fixed broadband connection if 5G offers the speeds and reliability they need. If households drop their $60 to $100 monthly fixed internet bill, they could afford a very big data plan on a 5G network.

Optus managing director of networks said “Everyone has heard of concepts like self-driving cars, smart homes, AI and virtual reality, however their full potential will require a fast and reliable network to deliver”.

Telstra will be hoping that it can achieve the same speeds and reliability, if not better, as Optus. Its future as Australia’s leading telecommunications company depends on it. If Telstra can generate strong revenue from self-driving cars and AI it could turn its fortunes around.

It will also be very interesting to see what happens with the second tier telecommunications businesses like Amaysim Australia Ltd (ASX: AYS). Optus and Telstra will have a lot of bargaining power as they are the ones building the 5G infrastructure.

Foolish takeaway

Profit margins will be key for Telstra after taking such a big hit from the NBN changes. 5G could be exactly what Telstra needs to turn things around, but management will need to get their skates on to beat Optus to the market.

The telecommunications world is still uncertain, that’s why I think it makes more sense to invest in winners like these hot stocks.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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