Don’t count T-Mobile US CEO Mike Sievert among those questioning the financial viability of the industry’s 5G investments or the return on investment operators are gleaning from the hundreds-of-billions-of-dollars that have been spent.

“Overall … this industry is delivering the dividends on 5G that we promised,” Sievert told attendees at this week’s J.P. Morgan Global Technology, Media and Communications Conference. “Revenues and cash flows are vibrant in the industry because we made these investments. … And what you have is a vibrant, growing, profitable industry where both the industry and consumers are winning, and that's what we see. We don’t see anything in the lasts quarter or two that changes that.”

Specific to his entity, Sievert noted that T-Mobile US reported a modest 3% year-over-year increase in service revenues for the first quarter of this year, but a more robust 46% year-over-year surge in cash flow for Q1 and is guiding a 75% full-year increase in cash flow for 2023.

Sievert’s sentiment runs counter to ongoing concerns over the ability for operators to squeeze a financial return on their 5G investments.

MTN Consulting recently noted in a report that telecom operator service revenues declined for most of 2022.

“It’s more important to focus on service revenues in assessing the health of the telco sector. That’s particularly important now, as telcos have spent heavily on their networks to deploy 5G,” the firm noted, citing a strong surge in 2022 capex. “Telcos, and their investors, expect new revenue streams to result from these buildout costs. So far, 5G has not delivered.”

That notion was backed by a recent PwC report that included ominous results of a survey that found 46% of global telecommunication CEOs believe their company will not be economically viable in 10 years if they continue down their current operating path.

The PwC report noted operators are likely to spend $275 billion on their 5G deployments between 2020 and 2026, with a 2.8% financial return on that capital investment and a 2.4% financial return on assets. Those returns were an increase on the $261 billion operators invested in their 4G networks between 2011 and 2019, but a lower return than the $183 billion invested in 3G technologies during the first decade of the 21st century.

5G fixed-wireless access ‘a fantastic phenomenon’

Sievert also touted continued growth in 5G-based fixed-wireless access (FWA) services, which T-Mobile US Chief Marketing Officer Mike Katz recently labeled as “one of the big killer apps for 5G” during the carrier’s most recent earnings call.

“Fixed wireless is a fantastic phenomenon, and we're still in the early innings of it,” Sievert gushed. “I love the fact that a lot of people are now believing that their best strategy is to cast dispersions on fixed wireless and try to downplay it. It says we've got their attention.”

T-Mobile US added approximately 600,000 new FWA customers during the first quarter, pushing its customer base to 3.2 million subscribers. Katz added that those customers are using “hundreds of gigs a month on average,” including strong usage in rural areas, which he added for some was “the first high-speed option that existed, and it only happened because of 5G.”

However, some have questioned the financial viability of 5G-based FWA services.

PwC’s report showed FWA services could cost more than 22-times as much as mobile connectivity services. This comes from costs associated with delivering data tied to specific latency or service-level agreements (SLAs).

The report also found that FWA services could have up to 40-times less revenue potential. This is due to FWA services being price limited by competing fiber or cable internet options.

“Most FWA subscribers are willing to pay only as much as wireline plans cost, yet they expect a similar quality of service for internet connectivity,” the report notes.

AT&T CEO John Stankey has also expressed financial concerns over the use of FWA technology.

“Mobile bits are going to be higher-value bits. They’re going to need to be engineered differently. They should sell at a premium because of the supply-and-demand dynamics on it,” Stankey said during AT&T’s fourth quarter of 2022 earnings call. “And I want to ensure that my mobile network is, in fact, delivering that premium solution on those mobile bets when they need to be provided. And it’s absolutely 100% there to do that.”

Stankey’s most recent comments on the topic were more subdued, telling investors during the carrier’s most recent earnings call that it remains focused on “durable” service offerings that provide a solid return on investment.

“There are many businesses that have usage profiles where I believe fixed wireless bundled in with other wireless services is a very durable offer, and it will be durable for a long period of time to come,” Stankey said of its FWA plans. “There are certain consumer segments where that’s durable, but it’s not most consumer segments, in my view.”

T-Mobile US’ Sievert is cognizant of those concerns, noting that the carrier is not reaching for un-checked 5G FWA growth.

“I also will remind everybody that we're not – this particular model on fixed wireless – we will take it into high single-digit penetration, and we don't have illusions that it's going to take over half the market,” Sievert said. “But for the market we're trying to serve, it's a highly profitable, accretive, incremental business with little to no capital allocated. It's a beautiful thing.”