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Tower Stocks Soar, Big Three Wireless Carriers Puke As SpaceX Strikes Low-Band Spectrum Deal

Tyler Durden's Photo
by Tyler Durden
Authored...

Summary

  • The Rise of Starlink Mobile 
  • Tower Stocks Jump; Carrier Stocks Tumble
  • Musk says this is the "last critical piece of the spectrum puzzle needed for SpaceX to provide complete phone coverage in America." 
  • SpaceX Secures Spectrum Deal To Challenge Big Telecom

Tower Stocks Erupt, Carriers Puke

Elon Musk's SpaceX announced overnight that it agreed to acquire a nationwide portfolio of low-band spectrum licenses, which it will combine with its satellite-to-cell services to create a next-generation mobile carrier to challenge the Big 3 mobile network operators.

Musk wrote on X that the low-band spectrum represents "the last critical piece of the spectrum puzzle needed for SpaceX to provide complete phone coverage in America."

Market reaction in premarket trading: US cell-tower stocks jumped while wireless carriers tumbled.

  • Towers: Crown Castle gained 8.2%, American Tower rose 6.4%, and SBA Communications advanced 5.6%.

  • Carriers: T-Mobile fell 7.7%, while Verizon and AT&T each fell about 6%.

Barclays analyst Brendan Lynch wrote in a note that Starlink's "terrestrial network" is a "game-changer" for tower companies. The spectrum deal was one of six catalysts Lynch cited when he upgraded Crown Castle and American Tower in August.

Citi analyst Michael Rollins also described the deal as a net positive for tower stocks and an ongoing risk for telecom stocks. He maintained a "Buy" rating on SBA Communications, American Tower and Crown Castle, while warning that telecom and cable stocks could face near-term selling pressure.

Here's Jefferies analyst Graham Hunt's first take on the Starlink deal:

A potential positive for Towers. We see SpaceX announcement last night of an agreement to acquire 800 MHz of low-band spectrum in the US from Grain Management as a potential positive for our Towers coverage. SpaceX says the terrestrial spectrum will complement its existing 2 GHz satellite capacity, as it looks to "become the first network operator to deploy both satellite and terrestrial spectrum".

US Towers AMT, CCI and SBA (covered by Jonathan Petersen) are up 3-5% after hours, reflecting potential SpaceX will require a terrestrial tower network and could become an additional tenant on existing sites. We note, however, SpaceX has also discussed a capital-light approach based on "femtocells" installed alongside Starlink dishes, which could reduce reliance on conventional macro towers.

Bottom line, we see the acquisition supporting our view that a fully functioning mobile network requires terrestrial infrastructure investment, and that terrestrial growth remains an essential part of future mobile network infrastructure.

Read across outside the US is difficult given different spectrum ownership, licensing and regulatory structures, however overall we see this as a positive for Towers.

Bernstein analyst Laurent Yoon wrote in a note, "Whether or not SpaceX ultimately builds a nationwide network, Musk's track record creates a credible threat that is likely to remain an overhang on incumbent valuations."

Peter Supino of Wolfe Research wrote, "We believe a 'someday' Starlink Mobile network is not priced into telecom stocks, and that Thursday's news increases the probability and potential speed of that scenario." 

"Last Critical Piece": SpaceX Secures Spectrum Deal To Challenge Big Telecom

Major telecom stocks puked after hours after Elon Musk's SpaceX announced it would acquire a portfolio of up to 14 MHz of paired low-band spectrum in the 800 MHz band, positioning Starlink to become a major mobile carrier in the US.

Musk wrote on X that the low-band spectrum represents "the last critical piece of the spectrum puzzle needed for SpaceX to provide complete phone coverage in America."

"While Starlink Mobile's global 2 GHz mid-band spectrum will provide high-bandwidth capacity in the United States, this new low-band spectrum will provide a coverage layer that ensures Starlink Mobile's signal penetrates through obstacles, such as walls, and can provide service to customers' devices even when they are in buildings. Critically, most existing mobile devices already support this underused band," SpaceX noted.

Subject to Federal Communications Commission approval, SpaceX plans to combine its nationwide low-band spectrum license portfolio with its satellite-to-cell services, which the company said will enable "high-speed service directly to unmodified devices anywhere in the world."

AT&T tumbled 7.3% in after-hours trading, while T-Mobile US and Verizon Communications each dropped 6.6% as of 5 p.m. New York time. SpaceX rose 1.5%.

Another piece of the puzzle:

TD Cowen analyst Gregory Williams recently told clients, "Any entry of SpaceX as a mobile carrier could be highly bearish for the wireless industry."

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