The eagerly awaited 5G frequency auction in Germany dragged on for an agonizingly long time. It took a total of 497 bidding rounds before the decision on the allocation of the frequency bands was made. It was fitting that Rüdiger Hahn, the head of department at the Federal Network Agency responsible for the auction, retired during the auction - he took his remaining vacation during the hot auction phase.

"We urgently need an Infrastructure 4.0 program to ensure that Industry 4.0 in Germany does not fail due to dead spots and small states," says Thomas Rappold.

© Thomas Rappold

The state can look forward to a windfall of almost 6.6 billion euros. After all, the previous three mobile communications infrastructure monopolists Deutsche Telekom, Vodafone and Telefónica will have a competitor in the form of the United Internet subsidiary Drillisch, which could shake up the encrusted German mobile communications landscape. As soon as the auction was over, the heads of the new license holders came forward in a multi-layered canon, in some cases voicing massive criticism of the auction mechanism.

Vodafone Germany CEO Hannes Ametsrieder was the most outspoken, claiming that Germany's image as a digital location had been damaged by the process and the auction result. In his opinion, it is important to define in advance what you really want to achieve in the end. A wise statement. But why is Germany finding it so difficult to expand its telecommunications infrastructure and why are there no bilateral talks between the mobile network providers and the government about a national mobile communications strategy in advance of frequency auctions?

The reason for all the trouble probably lies in the ludicrous UMTS auction in 2000, which brought the state record revenues of 50 billion euros, but at the same time put the mobile phone providers in difficult financial waters. The money that had been spent on the overpriced frequencies was subsequently lacking for network expansion. In the world rankings of the fastest Internet connections, world export champion Germany is in a distant 25th place and has to give way to countries such as Romania, the Czech Republic, Latvia and Bulgaria.

The telecommunications model country Finland took a completely different approach: instead of driving the mobile providers into expensive bidding battles, the Finnish government offered three large frequency blocks of the same size for the three providers participating in the auction, Telia Finland, Elisa and DNA. The three providers only had to put EUR 77 million on the table. Finland, Nokia's home town, sees 5G as a great opportunity for the domestic industry and wants to compete with the USA and China in the new mobile communications standard. A touch of consistent industrial policy, especially as Nokia is reinventing itself as a 5G system supplier following the crisis with its recently loss-making smartphone business.

China as a role model?

Germany's leading trading partner China is pursuing a strategic industrial policy on a completely different scale and could thus become a role model for our lousy network infrastructure debate. The three major Chinese mobile phone companies China Mobile, China Telecom and China Unicom are acting like something out of a capitalist textbook when it comes to network expansion. Instead of fighting each other for the best cell tower sites and spoiling prices in expensive bidding wars, these three providers have recognized that mobile network infrastructure is not a real differentiating feature of their business activities and, as a result, merged their respective cell towers into an independent company under the name China Tower in 2014.

The model for this was the arch-rival USA. With American Tower, Crown Castle and SBA Communications, three listed providers are highly successful on the American and international market and are buying up rows of mobile phone masts or building new masts for the expansion of 5G networks. A highly lucrative business, as can be seen from the share prices of these companies: Like a string of pearls, these go up continuously year and day. The principle is simple: the operators of the masts have an interest in ensuring that their sites are as fully booked as possible and, in return, the mobile communications companies only have to pay rental fees for a site instead of investing a large amount of capital in the construction and maintenance of the masts - as the saying goes: a problem shared is a problem halved.

The IPO of China Tower was thus a foregone conclusion. The company raised a total of 6.9 billion dollars for 25% of the shares in its IPO on the Hong Kong stock exchange last year. The company with 1.9 million masts and 2.8 million antennas was valued at just under 30 billion dollars. The majority of the investor funds - around 60% - will be used for the rapid expansion of the 5G network along the Chinese growth regions in the Pearl River Delta such as Guangzhou, Shenzhen, Shanghai and Hangzhou, but also in the metropolitan region of Beijing. China Tower shares were in great demand among investors. Shares worth 1.4 billion dollars had already been subscribed in advance by ten major investors, including the Alibaba Group's Taobao China Holding. CEO Tong of China Tower commented on the strategic investors with a wink: "Our key investors are good companies from different industries. There is great potential to work with them in the future." Tong wants to reveal what the plan for this looks like "if necessary".

And how are German politicians reacting? The parliamentary groups of the governing parties recently agreed on a paper that envisages the formation of a federally owned infrastructure company, which in turn would build mobile phone stations in regions where there is no reception. More state instead of market! The Chinese have copied the German motto 'Industry 4.0' and coined the term 'China 2025'.

It would therefore be wise to follow the Anglo-Chinese capitalist model when expanding the 5G infrastructure: Ultra-low interest rates are massively destroying the population's savings capital and the major insurance companies are desperately looking for safe investments.

So what could be more obvious than attracting private savings capital for a private German mobile communications infrastructure company and thus killing two birds with one stone: rapid network expansion and attractive dividends to shareholders at the same time. Wealthy investors have already jumped on the bandwagon: Jack Ma of Alibaba at China Tower and most recently Bill Gates at Crown Castle. The 5G Technology Index takes this strategy into account, from which German investors can ultimately also benefit: The mobile infrastructure companies Crown Castle, American Tower and China Tower are important components of the index. In addition, it covers the entire 5G value chain - starting with the manufacturers of the end devices such as Apple and Samsung, the antennae and chip manufacturers such as Qualcom, Intel and Broadcom, the network equipment suppliers such as Cisco and Ericsson as well as mobile network providers such as AT&T, Deutsche Telekom and China Mobile.

Author:
Thomas Rappold is a financial/stock market expert, author (Silicon Valley Investing) and founder of numerous Internet start-ups.