You’re Just in Time to Cash In on 5G Upgrade Mania

If you've been following along with Money Morning's recommendations, you already own 5G tech and infrastructure investments like Keysight Technologies Inc. (NYSE: KEYS) and Lattice Semiconductor Corp. (NASDAQ: LSCC).

But the whole beauty of this thing is, the further along we get in the nationwide rollout of this high-tech broadband capacity, the more ways there are to profit.

The 5G race heated up a few degrees last month, when Apple Inc. (NASDAQ: AAPL) launched its new iPhone 12, which - you guessed it - has built-in 5G capacity.

Now, the iPhone 12 isn't the first or even only smartphone able to connect to an available 5G network, but, judging by preliminary sales figures (the hard numbers weren't included in Apple's late October report) of around 75 million units sold, it's by far the most popular model with that capability.

That's set off a frantic race between America's big mobile carriers to carve out the biggest slice of this $79 billion market.

And as we've seen so often in tech history, when there's that much competition for consumer dollars, it's really easy for investors to cash in...

The iPhone Is No. 1 on Most-Wanted Lists Everywhere

Like I said, Apple doesn't have the first 5G-capable smartphone.

The first one came out in 2019, but I bet the ZTE Axon 10 Pro doesn't ring any bells; it's not even available in the United States. The first 5G unit available stateside was the $1,000-plus Samsung Galaxy S20.

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But even though Samsung and Apple are roughly neck and neck in the sales game, the iPhone is in a league of its own, because it has an upscale "affordable luxury" cachet all its own.

Tied up in that cachet is the fact that the 100 million Apple iPhone owners in the United States are some of the most zealous "upgraders" on Earth. A survey from Office Depot showed that iPhone users are more than twice as likely to be locked into an upgrade plan of some kind, and those users will spend $281 a year on average, compared to $196 for Android users.

That's practically money in the bank for major carriers; their margins get fatter and fatter... and fatter with every new iPhone release: "Wanna upgrade to the newest iPhone when it hits the street? No problem - just sign this contract for a significantly more expensive data plan to go along with it." And another, and another. And so it goes. That's mostly cream on top; it's not really costing carriers much more, year on year, to provide the data service.

Some Apple iPhone users have been locked into carriers' lucrative upgrade cycles for 12 or 13 years now. It's still a little early to tell, because the iPhone 12 has only been out about a month or so, but industry analysts predict the new iPhone 12 will set off an upgrade cycle that blows the doors off anything that's come before it.

Who Wins the Carrier Wars? You Do...

So it's no wonder major carriers like AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ), and T-Mobile U.S. Inc. (NASDAQ: TMUS), are scrambling to put together deals upon deals for the new iPhone 12, which retail for between $699 and $1,099, depending on the bells and whistles.

We're starting to see some ferocious competition for the consumer's Apple dollar out there among the majors. A simple Internet search already shows the carriers are jostling to put their deal in front of more consumer eyeballs.

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You'll have to take my word for it, but I've just googled "best iPhone 12 deals," and, without scrolling down the page, there are an eye-popping seven "$0.00" offers among the big guys, all for models with varying storage capacity and different features, some of which are pretty intensive. I'm not even diving into the details of the data plans, but that stuff is in the fine print, where the "sausage" is made.

So the deals are extremely aggressive, because the carriers know they can make it up on the backend with upgrade contracts.

The truth is I think most major carriers will see a bottom-line boost courtesy of the iPhone's huge fans, but I think the best play on this facet of the 5G rollout is AT&T Inc. (NYSE: T).

AT&T shares are off more than $10 from their 2020 highs, but the stars are lining up nicely for the company; the iPhone 12 is hitting at just the right time. This is one of those cases where a beaten-down stock makes a compelling buy.

Old-school stocks like AT&T aren't always my cup of tea. AT&T has never been a stellar performer; it trades at about half of its 1999-2000 peak, but it's a consistent performer.

This "dividend aristocrat" has hiked its payout for something like 35 straight years, to the point where it's paying around 7.2% per share, which definitely beats inflation

I'm not worried about that dividend, either. AT&T sports around $8.3 billion in free cash flow as of last quarter, against a payout of more than $3.5 billion - the high dividend's not killing the stock, in other words.

I think AT&T's association with "hot" technology like 5G and an even "hotter" product like the iPhone 12 will give it a new allure for investors, who will come back into the stock. Look for a double-digit gain, not including dividends, over the next year, but leave room to be pleasantly surprised.

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