SpaceX spectrum deal unsettles investors in AT&T, Verizon, T-Mobile
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SpaceX's plan to compete with the major cell phone service providers is coming into sharper focus — and raising investor concerns about the threat it poses to traditional telecom companies.
Why it matters: Elon Musk has designs on turning SpaceX's Starlink satellite business into a major player in telecom — and he's using the company's massive market position to put his plan in motion.
The big picture: Shares of AT&T, Verizon and T-Mobile plunged Friday after SpaceX announced a deal to acquire a swath of nationwide low-band spectrum from a private investment firm.
- Buying these licenses allows Starlink to begin reaching areas that satellite currently struggles to reach, like the inside of buildings, Axios Pro's Lucinda Shen reports.
Reality check: SpaceX will need a lot more than spectrum to begin offering viable cell phone services in most major American cities via terrestrial connections.
- Spectrum is basically the airwaves that carry wireless signals.
- But you still need physical infrastructure to transmit and receive those signals to provide wireless coverage.
Flashback: AT&T CEO John Stankey told Axios last week that SpaceX's plan to avoid the huge costs of building cell phone towers by installing small cellular base stations alongside Starlink dishes on homes and businesses would not be enough to become a serious competitor.
- The sheer costs and regulatory barriers make it "not a viable strategy," Stankey said.
Zoom out: The other major telecom companies have also downplayed a threat from Starlink.
- "Satellite complements traditional terrestrial networks," Verizon spokesperson Katie Magnotta said Friday in a statement. "Acquisition of spectrum alone does not provide the network or infrastructure to offer true nationwide coverage or to compete with mobile providers."
- T-Mobile CTO John Saw said on LinkedIn that he has "tremendous respect for what SpaceX has accomplished in space," but noted that more than 70% of mobile traffic takes place indoors.
- "That's where terrestrial networks have a fundamental advantage," Saw wrote. "Direct-to-Cell technology can extend connectivity to outdoor places traditional networks don't reach, but delivering a consistent indoor mobile experience is a very different challenge."
What they're saying: "Buying spectrum is not a commitment to build a nationwide network," Bernstein analyst Madison Rezaei wrote Friday. "But this is the spectrum we thought SpaceX needed to make that option more credible—and less expensive."
SpaceX executives say they're confident in their path to grab market share from the entrenched players.
- "I anticipate us to be able to acquire quite a few of their customers because I think our service will be better," SpaceX president Gwynne Shotwell said in August on SpaceX's first earnings call after going public.
The impact: Shares of AT&T, Verizon and T-Mobile closed down 9.8%, 8.8% and 13.3%, respectively Friday, in the first trading day after the spectrum acquisition.
What's next: SpaceX officials have said they plan to launch their cell phone service business in late 2027.
