5G in the UK: what are the top stocks to watch?

What's on this page?

1. ​How to trade or invest in 5G stocks
2. Best UK 5G shares to watch
3. 5G in the UK: what you need to know
   

How to trade or invest in 5G stocks

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Learn how to start trading or investing in 5G, or find out more about the best global 5G stocks

Best 5G UK shares to watch

Below is a list of stocks that are involved in bringing 5G to the UK, such as BT Group and Vodafone. There are also a number of other stocks that contribute to 5G in other ways, such as making the chips needed for devices to connect to one another. These stocks are picked not necessarily as best by size, but rather based on market capitalisation, future prospects and other factors.

1. BT Group
2. Vodafone
3. Spirent Communications
4. XP Power
5. BATM Advanced Communications
6. Telit Communications
7. Trackwise Designs

BT Group

BT Group is the largest player in the UK when it comes telecoms. It owns the largest 5G network in the country, European Economic (EE), and it owns the UK’s national broadband infrastructure, Openreach, which it still owns even if it was legally separated from the business back in 2017. The fact full-fibre is an enabler of 5G means BT Group does have an edge over its rivals because it has significant exposure to both, with other mobile and broadband providers having to piggy-back off its networks. BT already provides 5G to over 160 towns and cities.⁴

Although BT is the natural leader in the UK due to its unique position in the market, this also means it has the biggest responsibility. The company is having to invest billions into both full-fibre broadband and 5G, and is facing increased competition after years of being accused of holding a monopoly in the UK.

This forced it to suspend its dividend for the first time in nearly ten years at the end of 2019. The group has said it plans to release a 7.7p dividend in this financial year – an amount that was met with lukewarm investor response. In its year-end results on 31 March, the company also reported that revenues had decreased by 7% thanks to the Covid-19 pandemic.

Learn how to buy, sell and short BT shares

Vodafone

Vodafone is the other major mobile network operator listed in the UK, although it is a very different company to its rival BT because it is more focused on Europe rather than the UK.

In fact, the UK only generates 15% of revenue and 10% of adjusted earnings, with Germany being by far its largest market following the acquisition of Liberty Global's European assets last year. It has already launched 5G services in over 100 cities across the UK, as well as many more besides in over eight European countries including Germany, Italy and Spain. Vodafone has said its 5G strategy is based around ‘co-leadership’, whereby it will aim to match the rollout speed to the leader in each country (in the UK’s case BT Group).

Vodafone has had an expensive past few years, however. Thanks to disruption caused by Covid-19, Vodafone said in its first quarter (Q1) of 2021 results that sales and commercial activity were 40% below pre-Covid-19 pandemic levels in the UK, France and Germany. It presumably also has a huge pile of debt after spending $21.3 billion on acquiring Liberty Global deal cable systems in Europe in 2019. None of this is ideal when investment in 5G and other services will remain high for the foreseeable future.

Learn how to buy, sell and short Vodafone shares

Spirent Communications

Spirent Communications is a company benefiting from the move to faster connectivity. The company tests 5G and broadband connections and devices, which is in demand as the market introduces new products and services. Its networks and security division, which tests Wi-Fi and ethernet connections, accounts for over 60% of revenue, while its lifecycle service assurance unit uses automation and analytics to identify problems in networks and products. It also has a small connected devices division that helps companies with wireless networks.

5G is big business for Spirent. Its security solutions and testing services are benefiting as countries introduce 5G, and the fact it serves companies around the world means it can reap rewards even if roll-outs are delayed in one country or region.

Learn how to buy, sell and short Spirent Communications shares

XP Power

XP Power is predominantly known for designing and making power control solutions, such as converters that allows high-voltage electricity from the central transmission network to be reduced and used by a household or business.

It has three key units, one providing power products for automated equipment designed for industrial and factory use, another providing products for medical equipment, and a third supplying companies that makes semiconductors and other chips for the communications sector. XP Power has said its business supplying semiconductor manufacturers has ‘highly attractive growth prospects which are being driven by the growth of big data, artificial intelligence (AI), autonomous vehicles, the internet of things (IoT) and the roll-out of 5G’.

Quite simply, 5G means more digital products entering the market – whether that be an automated machine in a factory or a smart device in the home – which means more products will be needed to power them.

Learn how to buy, sell and short XP Power shares

BATM Advanced Communications

BATM Advanced Communications is a company with two distinct business, one of which that provides cyber security, software and hardware to the telecoms industry. In 2019, it developed the NFVTime operating system, a high-capacity networking platform that helps networks utilise 5G and edge computing. In fact, as of January 2021, NFVTime is available to public cloud networks.

BATM said the platform, developed by its subsidiary Telco Systems under a joint agreement with Chipmaker Arm, can effectively scale down the cost of deploying services [for network operators] while increasing system performance to levels not seen by other platforms’ following a proof-of-concept trial with Vodafone in 2020. BATM’s other, slightly larger division focuses on biomedicine, supplying diagnostic equipment and services to the medical and pharmaceutical industries.

Learn how to buy, sell and short BATM shares

Telit Communications

Telit Communications makes components needed for smart devices and IoT devices to connect to networks, and provides platforms for them to operate on. Telit’s strategy is focused on the evolution of products and devices in a world of faster connectivity and creating the next generation of modules, routers, gateways and other products and services that are needed to run them.

Its existing position in 4G and other technologies makes it a natural partner for many looking to make 5G-enabled devices, and the fact 5G will lead to more smart devices entering the market should boost demand for Telit’s products and services.

Learn how to buy, sell and short Telit Communications shares

Trackwise Designs

Trackwise Designs manufactures circuit boards that are used in antennas and other communication products, allowing all the different components in a device to interact with one another. It has its own patented manufacturing process for circuit boards named Improved Harness Technology (IHT), which is being rolled out to meet increased demand from electric vehicles, aerospace and healthcare markets.

It says its growth targets for IHT is ‘based on the sustained foundation of profitable supply of RF products in support of 4G and 5G network deployment’. Its first order for IHT was made last year by an unnamed UK-based maker of electric vehicles, which is using it to produce circuits that go into the vehicle’s battery for at least the next three years.

Trackwise has experienced volatility in 2021, however, with shares toppling 14% in June after the company’s latest results delivered resilient revenues but, nevertheless, showed a Covid-19 pandemic-related loss of over £350,000.

Learn how to buy, sell and short Trackwise Designs shares

5G in the UK: What you need to know

Here’s everything you need to know about 5G and its roll-out in the UK:

What is 5G?

5G is the next generation of wireless technology, following on from 2G, 3G and the 4G that most of us use today. It is up to 100 times faster than current networks, offering speeds of up to ten gigabytes per second (gbps). It offers greater capacity, allowing more smart devices to connect to the network and it’ll provide the low latency needed for the likes of an autonomous car to react in near real time, with 5G allowing devices to respond in as little as one millisecond.

Our mobile phones are the first devices that are beginning to benefit from the rollout of 5G by bringing us faster connectivity. But 5G is about much more than just being able to download films or scroll through social media at a quicker pace, and is expected to revolutionise a number of industries ranging from healthcare to manufacturing, as well as unlock a number of technologies like AI and machine learning.

5G in the UK: what you need to know

The UK government has said 5G could deliver ‘significant economic benefits from the digital transformation of many sectors’. The conservatives put 5G high on their list of priorities in the last general election and said it was aiming to have the majority of the population connected to 5G by 2027. The government has also pledged to have 5G coverage for 85% of the United Kingdom by 2025, a deadline many are sceptical of it meeting.

5G is being rolled out in tandem with superfast full-fibre broadband, which allows drastically faster broadband connections than traditional copper lines.The two complement one another and full-fibre broadband is at a more advanced stage of being introduced, partly because it is needed for a 5G network to be effective. The UK government is aiming to have 15 million premises hooked up to full-fibre by 2025 and for nationwide coverage by 2033.

The responsibility of rolling out 5G falls at the feet of the country’s four main mobile network providers – BT Group, Vodafone, Telefonica’s O2 and CK Hutchison’s Three. These companies own and manage the majority of the UK’s mobile communication infrastructure, and have invested significant sums to introduce 5G across the country. The government has said the ‘mobile network operators will be central to 5G’s successful delivery’.

BT Group has the additional responsibility of introducing faster broadband thanks to its ownership of the UK’s national broadband network Openreach, competing against Sky, Liberty Global’s Virgin Media, TalkTalk and a number of other smaller providers. BT has already invested more than £12 billion in the rollout of broadband to remote UK, and will be allowed to charge other broadband operators a fee for ‘piggybacking’ off of Openreach’s 5G network.
It is worth noting that Telefonica’s O2 and Virgin Media have officially merged as of 1 June, so that they could provide a package of TV, mobile and broadband to better compete with the likes of BT.

All four core 5G providers, and numerous other companies, are having to invest heavily to install the equipment needed for these technologies to work. For example, faster broadband entails replacing copper wires with fibre optic cables that can transfer data quicker, while 5G needs a lot more infrastructure than 4G because it needs to run on higher radio frequency bands to deliver faster speeds.

According to Deloitte, there will need to be three to ten times as many sites and masts to run 5G compared to the existing 4G network.³ Companies are expected to invest huge sums into these networks, but they will not reap the reward of them for many years to come.

UK bans Huawei from 5G network

Much of the extra equipment and infrastructure needed to introduce 5G, such as radio access units, is supplied by just three companies in the UK: Finnish firm Nokia, Sweden’s Ericsson, and Chinese outfit Huawei. However, that slim choice has been cut down further after the UK government banned Huawei from supplying any 5G equipment.

Huawei is by far the largest provider of 5G equipment in the country (and the world) and the ban means that UK telecoms companies have not been able to purchase any new gear from the company beyond the end of 2020. They will also have to remove all existing Huawei equipment from their networks by 2027.

You can read more on the UK’s ban on Huawei, and what it means for the likes of BT Group and Vodafone, in our in-depth article.

How much will 5G and full-fibre cost to implement in the UK?

The UK government has said it will cost up to £30 billion and an additional 30,000 workers for the full roll-out of full-fibre broadband – however, this was in 2019 and did not take the Covid-19 pandemic into account. The cost of 5G will presumably be lower, thanks to the fact it is building on top of the existing network. But it will still be costly.

A government review in 2018 said deploying an extra 200,000 sites, enough to provide 5G coverage in ‘most urban areas’, would be around £3 billion, and said it expected mobile network operators to collectively spend about £1 billion per year on 5G infrastructure. The Huawei ban will only delay the introduction of 5G and add to the costs. The UK government admitted that replacing all existing Huawei equipment would cost up to £2 billion alone, and could delay the full introduction of 5G (which has a tentative date of 2025) by up to two years.

Footnotes

¹ Based on revenue (published financial statements, 2022).
² Trade in your share dealing account three or more times in the previous month to qualify for our best commission rates. Please note published rates are valid up to £25,000 notional value. See our full list of share dealing charges and fees.

Sources

³ Deloitte, 2018
⁴ BT Group, 2021