When SpaceX says something, investors should probably believe it—and expect things to take off like a rocket.
Elon Musk’s rocket and AI company is acquiring a low-band spectrum license portfolio, stoking fears of wireless telecom disruption and sending shares of AT&T and its peers lower.
On Friday, AT&T was down 7.3%. Verizon Communications and T-Mobile were down 5.6% and 8.7%, respectively.
Fears that SpaceX would enter mobile wireless communications, adding to its Starlink space-based broadband product, have dogged the sector for months.
SpaceX has been upfront with its ambitions. In September, CFO Bret Johnsen talked through the plans: “If we need to, we can stand up terrestrial [wireless] solutions…or we could work with the existing carriers. We’re open to I think a lot of different ways to do it. But we’re marching down [the mobile wireless] path in the U.S.”
The agreement, with Grain Management, would give SpaceX a nationwide low-band spectrum license portfolio of up to 14 megahertz of paired spectrum in the 800 MHz band.
“This prime low-band spectrum addresses one of the key remaining technical gaps that will pave the way for Starlink Mobile to become a major mobile carrier in the U.S.,” SpaceX said in a statement.
That’s competition for the traditional industry.
“We had recently highlighted Grain’s portfolio as a potential transaction candidate…,” wrote Raymond James analyst Ric Prentiss. “We estimate the acquisition would increase SpaceX’s U.S. mobile spectrum holdings from about 65 MHz to about 79 MHz, although still well below the nationwide wireless carriers.”
AT&T, for instance, has hundreds of MHz of low- and mid-band spectrum.
The deal benefits tower companies, he added. SpaceX still needs terrestrial infrastructure to offer mobile services.
Shares of wireless infrastructure provider Crown Castle and American Tower were up 11.2% and 7.1%, respectively.
“Starlink Mobile’s flexible, hybrid architecture will leverage both terrestrial and satellite technology to ensure all Americans have high-speed mobile broadband,” reads part of the agreement.
The deal is significant for the wireless industry. SpaceX isn’t content to only offer broadband service. It apparently wants to control the phone, too.
Spectrum assets are becoming more valuable as space-based communications options proliferate. Spectrum is a finite resource. Just as two radio stations in an area can’t broadcast on the same frequency, wireless data providers need their own spectrum to avoid running into one another.
Cable companies also offer wireless service, partly to offset losses in their broadband business to wireless companies that offer internet to the home. Comcast stock was down 1.6%.
The wireless industry is changing—with SpaceX at the heart of the disruption.
It still could take a while for SpaceX to show up in wireless carrier results, though.
“We do not expect SpaceX to materially impact operating results of the big-3 Telcos until at least 2029,” wrote Citi analyst Michael Rollins.
Investors aren’t giving AT&T, Verizon, and T-Mobile the benefit of the doubt right now.
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