SpaceX is making a significant strategic move into the wireless communications sector, with its Starlink Mobile service poised to reshape the landscape. This development has sent ripples through the stock market, particularly benefiting companies like American Tower Corporation, Crown Castle Inc., and SBA Communications, which all saw substantial gains. In contrast, major mobile carriers AT&T, Verizon Communications, and T-Mobile experienced sharp declines on the news.
The core of SpaceX's expansion lies in its acquisition of nationwide 800 MHz spectrum from Grain Management. This move is crucial for enabling Starlink Mobile to provide robust terrestrial coverage, a necessary component even for satellite-based services, especially in dense urban areas and for in-building penetration. SpaceX stated that the acquired spectrum will allow Starlink Mobile's signal to "penetrate through obstacles, such as walls, and can provide service to customers' devices even when they are in buildings."
Analysts view this spectrum acquisition as a double positive for tower companies. It counters the narrative that cell towers are becoming obsolete with the rise of direct-to-device satellite technology. Furthermore, it positions SpaceX as a potential major customer for tower capacity, whether for large-scale network builds or more selective deployments. This is particularly welcome news for tower stocks, which have faced headwinds from rising interest rates and increased competition from satellite internet providers. American Tower has seen a more than 30% drop over the past five years, SBA Communications is down about 45%, and Crown Castle has fallen around 55%.
Some analysts suggest SpaceX might be employing a strategic negotiation tactic, using the spectrum acquisition announcement to secure more favorable terms for a mobile virtual network operator (MVNO) agreement with existing carriers. However, the prevailing sentiment is that SpaceX is serious about building out its own terrestrial network. The company's use of terms like "advanced terrestrial deployment" and "to become a major mobile carrier" in its press releases supports this view.
The potential for SpaceX to deploy its own network, utilizing cell towers, opens up new revenue streams for tower companies and could increase the value of their assets. Analysts at JPMorgan have noted that SpaceX may seek additional low-band spectrum, specifically mentioning Anterix's 900 MHz spectrum as a potential target. The prospect of SpaceX building out its own network using macro towers aligns with this view, aiming to deliver a user experience comparable to traditional wireless carriers.
For dividend investors, the news is also encouraging. Tower REITs are known for their above-average yields, with Crown Castle currently offering a 5.5% yield. The potential for SpaceX to become a significant tenant on these towers could further secure these attractive dividends.
