Shares of major telecommunications companies tumbled Friday after SpaceX SPCX announced an agreement to acquire a nationwide portfolio of low-band spectrum licenses, intensifying concerns about competition from Elon Musk’s space and artificial intelligence company.
SpaceX shares rose roughly 1% around midday following the announcement, while traditional wireless carriers faced a sharp sell-off even as the broader US stock market remained in positive territory.
Verizon shares fell 10%, putting the stock on track for its worst trading day since 2002, according to CNBC. T-Mobile dropped 13.03%, while AT&T declined more than 10%, hitting its lowest level in more than two months.
The pressure extended beyond the United States, with the STOXX 600 Telecommunications index falling 2.9%.
What is SpaceX planning?
SpaceX is expanding into the mobile market through a reported agreement to acquire a nationwide portfolio of low-band spectrum licenses from Grain Management.
The deal, reportedly valued at about $8 billion, covers up to 14 megahertz of paired spectrum in the 800 MHz band.
Low-band spectrum carries less data than mid- and high-band frequencies but can cover larger geographical areas and penetrate physical obstacles, including buildings, more effectively.
SpaceX plans to integrate the spectrum into its next-generation satellite system, positioning the company to compete more directly with established telecommunications providers.
The transaction still requires approval from the Federal Communications Commission (FCC).
FCC Chair Brendan Carr told CNBC that SpaceX’s entry into the market was a positive development for American consumers.
For incumbent wireless carriers, however, the proposed acquisition has raised questions about the competitive threat posed by a company seeking to expand its mobile capabilities.
Analysts sound warning bells
The prospect of SpaceX entering the market prompted concerns among analysts about the future competitive position of established wireless operators.
TD Cowen analyst Gregory Williams said the implications could be significant for traditional carriers if SpaceX follows through on its plans.
“We still believe SPCX wants an MVNO first; thus, SPCX could be bluffing,” Williams wrote. “This could be a tactic, but taking SPCX on its word, this puts the carriers on notice.”
An MVNO, or mobile virtual network operator, provides wireless services using another company’s network rather than relying entirely on its own infrastructure.
Evercore ISI analyst Kutgun Maral expressed a similar view, writing in a note that “The carriers’ best argument just got weaker.”
However, JPMorgan sees limited near-term competitive risk for US wireless carriers.
SpaceX’s ability to expand its mobile offering will depend partly on how it combines satellite connectivity with terrestrial infrastructure or partnerships with existing wireless providers.
Tower operators rally
While telecommunications carriers suffered steep losses, companies that operate mobile towers moved higher as investors anticipated that SpaceX would need ground infrastructure to support the expansion of its network.
American Tower shares rose 7.8% on Friday, while Crown Castle gained around 12.7% and SBA Communications advanced 6.7%.
The gains reflected expectations that SpaceX’s entry into the mobile market could create additional demand for terrestrial infrastructure, even as traditional wireless operators faced selling pressure.
JPMorgan has said SpaceX would need a terrestrial network or an agreement with a mobile virtual network operator to support its plans.
Goldman Sachs has expressed a similar view, helping bolster investor interest in tower operators.
With FCC approval still required, the proposed spectrum acquisition marks a potential expansion of SpaceX’s role in the mobile market.
Investors will be watching how the company develops its network strategy and how established telecommunications operators face this challenge.
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