The Federal Aviation Administration (FAA) has just authorized AT&T (NYSE:T) and Verizon (NYSE:VZ) to light up more 5G network towers.

Fear of interference with aircraft instrumentation has led to “dead zones” around some airports, with the regulator blocking wireless service providers from using their new systems. But getting more precise location data from cell towers has allowed the FAA to let carriers turn on more towers while balancing the safety of planes flying nearby.

5G networks are going to be where the wireless battles are going to be fought in the immediate future and being able to fully utilize the networks that carriers have purchased and deployed will be key to who will have the upper hand in space.

Having a competitive edge is an important issue for investors because the US telecom market is highly saturated, with 97% of Americans owning a mobile phone and 75% owning a smartphone. Mobile accounts for 50% or more of all web traffic. This means that any carrier’s market share gains will necessarily come at the expense of its rivals, so let’s see if AT&T or Verizon is the better buy.

AT&T has a lot of moving parts

AT&T prepares for the future. It has been aggressively buying spectrum at auction and spending $23 billion to acquire more than 1,600 C-band spectrum licenses early last year. Then in the fall, it spent billions more to acquire 40 megahertz (MHz) of the 3.45 gigahertz (GHz) spectrum. Several years ago, it spent tens of billions of dollars on AWS-3 spectrum, and was the biggest spender every time.

AT&T now has roughly the same amount of spectrum below 6GHz as Verizon, a key consideration because that’s where the early stages of 5G will launch. It will provide connectivity for Internet of Things devices, as well as mission-critical communications, including automotive applications.

Yet AT&T has yet to unravel past poor business decisions, acquisitions that left it so in debt that it neglected to invest in its future technology infrastructure until it was almost too late. The company is also expected to complete its divestment of the 71% stake in WarnerMedia it owns through a merger with Discovery in the second quarter, but it is still unclear whether he will split the division or split it.

CEO John Stankey wants to squeeze out as many shares as possible after the deal, which a split would allow, but he would likely have to pay a premium to shareholders. A spin-off would be simpler, and he told analysts he also needs to be aware of the large number of retail investors who own shares to ensure they are also getting value from them. Since the deal will result in a cut in AT&T’s dividend, getting it right is paramount.

Despite the cut in upcoming payouts, AT&T will still spend between $8 billion and $9 billion on its dividend, and the yield will still be close to 5%, keeping the payout at the high end of what much of the rest pays. American companies. .

Verizon under competitive pressure

While AT&T can catch up in the sub-6GHz spectrum, Verizon remains the one to beat. It has a decisive lead in the millimeter wave spectrum, which will eventually be where the industry ends up. It enables operators to offer peak speeds of up to 20 gigabytes per second and very high access point capacity.

Verizon continues to expand its home internet offerings in anticipation of the full 5G rollout and is present in more than 200 markets in 50 states with its 5G Home. It plans to be in 30 million homes by 2023 and 50 million by 2025.

But competition from AT&T and T-Mobile will only intensify as more C-band spectrum comes online. Wall Street expects Verizon to post subscriber losses in the coming first quarter, already a seasonally slow period.

Part of Verizon’s concern is that before C-band can be fully operational, existing satellite operators using the spectrum must switch to a different spectrum. This won’t fully happen until 2023 and will prevent Verizon from getting up and running by then.

Verizon has dropped the 3.45 GHz spectrum licensing tender in which AT&T was the big winner last year. While neither carrier will be able to take full advantage of its C-band licenses for two years, AT&T and T-Mobile will still be able to immediately deploy the 3.45 GHz spectrum they won last year.

The verdict

AT&T seems to be the big winner here. Although its divestiture of WarnerMedia is creating a distraction and investors are discouraged by the impending dividend cut that has made the telecommunications stock such an attractive investment over the years, it still has momentum in its favour.

AT&T has achieved virtual parity with Verizon in technology offerings and will have a head start in critical 5G network upgrades. It also offers an attractive valuation, compared to its competitor. With a dividend that will still be rich but more sustainable even after it is cut, as well as prospects for future growth, AT&T is the better buy of the two.