MXLL

By Jules Rimmer

Shares in America's three largest mobile-phone carriers fell sharply on fears of SpaceX competition

While Starlink offers satellite-based internet services at present, it is now looking to add cellular infrastructure to provide a broader offering.

Elon Musk's SpaceX is in talks with cellular infrastructure providers as part of an ambitious project to create America's fourth national wireless carrier. This spells competition - and trouble - for the three incumbents, T-Mobile, Verizon and AT&T, and shares in all of them have traded down sharply as a consequence.

Talk of this development in the strategy of Elon Musk's rocket-launch and satellite technology company has been circulating in the market for several weeks but late Thursday Bloomberg published an article, citing people familiar with the matter, suggesting that serious negotiations are already underway between SpaceX (SPCX) and at least one major cellular infrastructure provider.

While the trio of national carriers chalked up gains and outperformed the S&P 500 benchmark index Thursday, news of the reported discussions between SpaceX and tower operator Crown Castle were received badly by the market and in premarket trading Friday T-Mobile (TMUS) plunged 4.3%, Verizon (VZ) 3.7% and AT&T (T) 3.3%.

Chris Hillabrant, the chief executive officer of Crown Castle (CCI), was asked about the reports during his company's third-quarter earnings call Thursday and did not deny them. "You can assume we're talking to all parties," he said in response to questions. Apart from Crown Castle, the other two major operators of cellular towers are American Tower Corp (AMT) and Vertical Bridge .

The Bloomberg article suggested SpaceX was looking to lease or acquire 80,000 cell sites across the U.S. At present its offering is the satellite-based Starlink internet service but on the second-quarter earnings call a few months ago, both Musk and chief operating officer Gwynne Shotwell hinted at proposals to build a comprehensive mobile service that would require low-band spectrum for coverage and in-building access.

On Thursday, Citi's telecom team published a note on the latest developments, lead-authored by Micahel Rollins, in which they described the SpaceX push into mobile as "net-positive for the tower stocks and net-negative for the telcos." They highlight Crown Castle, SBA Communications (SBAC), American Tower and EchoStar (ECHO) as buy recommendations on this theme. The lease agreements that SpaceX would sign could be worth "billions of dollars," the report suggested.

Share prices of all three national carriers have all been under pressure in the last few weeks but Citi does point out that they will have time to restructure and develop strategies to compete. This is because it would take three to five years to build out the coverage and it could take a decade, they estimate, to approach a market share of 20%.

After a sharp 9% correction Thursday, SpaceX shares rebounded 3% on the news in pre-market trading Fridaqy and Crown Castle jumped 7%.

-Jules Rimmer

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10-23-26 0501ET