The Big Three wireless carriers were on track to have a nightmarish end to the week as SpaceX threatened to upend the telecom industry -- but savvy investors should consider buying the dip.
That's according to Citi analyst Michael Rollins, who said in a Friday research note that AT&T and its rivals may offer some upside over the next year due to "a lengthening device replacement cycle and lower churn" driving earnings growth.
When users take longer to upgrade their phones and switch providers less often, that delivers stronger cash flow for wireless carriers -- which, in turn, bodes well for their dividends.
The telecom stocks could sure do with a boost. AT&T sank 7.8%, Verizon Communications slumped 7.3%, and T-Mobile US dropped 7% ahead of Friday's opening bell.
The selloff came after SpaceX agreed to buy up to 14 megahertz of paired spectrum in the 800 MHz band from Grain Management, sparking fears that its Starlink Mobile service is about to disrupt the telecom industry.
Still, it may take a few years for Elon Musk's rocket and AI company to emerge as a true competitor.
"We do not expect SpaceX to materially impact operating results of the big-3 Telcos until at least 2029," Rollins wrote, adding that until then AT&T and its peers are likely to "unbundle" their core plans from additional fees to remain competitive.
Barron's has previously argued the best way to play the battle for telecom is to buy shares of legacy satellite operators, which may be able to sell their spectrum. EchoStar and Viasat were both rising on Friday as investors bet there could be further consolidation.
