In its 2019 outlook for the global telecommunications sector, the ratings firm said, given that 5G use cases were still several years from maturity, it was inclined to believe that operators would take a measured, economically focused approach that would result in a slower rollout than in the case of 4G.
The outlook authors — analysts Chris Mooney, Madhav Hari, Allyn Arden, Mark Habib, JunHong Park and Luis Manuel Martinez — said they expected carriers in the US and some Asia-Pacific markets would indulge in aggressive 5G buildouts, while European and Canadian operators were likely to be more conservative in their approach.
In the US, S&P said it was taking a cautious view as accelerated investments - purchase of spectrum licences, deployment of small cells and higher costs for 5G equipment - would make it difficult to obtain near-term credit given that balance sheets were already quite stretched.
But in the Asia-Pacific, the outlook was different, with S&P projecting that operators in South Korea, Japan and China would be able to cover 5G investments through their cash flows, meaning that telcos would not have to take on too much debt to build 5G networks.
In Europe and Canada, S&P said it expected slower investments in 5G, with capital expenditure at European telecommunications companies likely to remain static and not affect near-term credit. This was predicated on spectrum auctions not requiring a great deal of investment.
"Being a 'second mover' may also carry an additional benefit due to a declining cost curve for equipment," the analysts said. "And with the current European focus on fixed upgrades, we think Europe will be well positioned with dense fibre backhaul to be a fast-follower. As a result, we believe that credit implications are limited.
"Similarly, we expect that Canadian telcos will take a more measured approach to 5G because their credit metrics have weakened due to spectrum and network investments, shareholder returns, and employee pensions."