SpaceX's low-band spectrum deal sends AT&T and T-Mobile down about 9%

The report does not give the price SpaceX is paying Grain Management or how much spectrum changes hands ^[2]. Without those terms, the deal can lead to more than one outcome, and the outcomes differ on who pays and when.

The first is the one SpaceX describes, satellites plus towers. "You will have not only the capacity from the satellites themselves, but you will have a build-out of the terrestrial, basically the hardware and systems necessary to make a true mobile service exactly what you want it to be," chief operating officer Gwynne Shotwell said on SpaceX's last earnings call ^[6]. Towers are the expensive part. MarketWatch reported that the Grain spectrum would not by itself let SpaceX build a nationwide network ^[9]. "But SpaceX is still far from having the assets needed to offer a service that would be competitive with the services offered by the Big Three carriers," Craig Moffett of MoffettNathanson wrote ^[8].

Moffett's own reading is narrower. He sees the deal as a step toward a mobile virtual network operator agreement, letting Starlink sell service under its own brand over an incumbent's network ^[16]. Charter Communications and Comcast each have that kind of agreement with Verizon ^[10]. He does not expect any carrier to sign one with SpaceX. "It is only clearer now, however, that none of the Big Three has any intention of enabling Starlink as a competitor by giving it such an agreement," he wrote ^[17].

The third outcome does not depend on SpaceX building anything. Kutgun Maral of Evercore wrote that the deal "shows SpaceX will pay for terrestrial spectrum, which supports our view that its presence pushes up clearing prices at coming auctions whether or not it wins" ^[20]. I think this is where the cash moves first. Walter Piecyk of LightShed Partners called some of the fear "premature" ^[11]. He can be right about the network and the auction cost can still land on the carriers. The auction view is wrong if SpaceX stays out of the bidding, or bids and the licences clear where the carriers had budgeted.

Verizon, the carrier that already hosts Charter's and Comcast's mobile brands ^[10], fell about two-thirds as far as AT&T and T-Mobile on Friday morning ^[14]. Peter Supino of Wolfe Research argued the stocks still had more to price. "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," he wrote ^[15].

Piecyk's sharper point is about what the carriers have not bought. He called it odd that Verizon still has not acquired EchoStar's AWS-3 spectrum, which he thinks would give it "much-needed capacity" without much more capital spending ^[13]. "They've spent years dismissing SpaceX as a competitive threat while passing on opportunities that might have worked in their favor," he said ^[12].