Starlink Mobile Threat Sends AT&T, Verizon, and T-Mobile Stocks Tumbling

SpaceX made it official this week: Starlink Mobile isn't just a satellite side project. It's gunning for AT&T, Verizon, and T-Mobile customers directly, and Wall Street noticed.

During SpaceX's first earnings call following its record-setting IPO in June, company president Gwynne Shotwell told investors the company will build out a full terrestrial network to back up its satellite service, not just offer occasional satellite texting the way T-Mobile's own Starlink partnership does today.

"The spectrum that we purchased from EchoStar does have terrestrial components, so we definitely intend to build out the terrestrial component," Shotwell said on the call. "You will have not only the capacity from the satellites themselves, but you will have a buildout of the terrestrial, basically the hardware and systems necessary to make a true mobile service exactly what you want it to be."

The plan hinges on 65 MHz of spectrum SpaceX is acquiring from EchoStar. Rather than building traditional cell towers, SpaceX wants to mount small "femtocells" on the same rooftop hardware that already hosts Starlink broadband dishes. Shotwell said the approach lets SpaceX skip the billions carriers typically spend on low-band spectrum and towers before ever turning on service. 

CEO Elon Musk backed up the pitch, saying the company is "reasonably confident" it can deploy large numbers of small stations that could ultimately offer "higher bandwidth than what is currently available from cellular providers."

Shotwell said SpaceX plans to launch its next-generation Starlink satellites in 2027 and begin offering the upgraded mobile service by the end of that year. She also pointed to the roughly $600 billion in annual revenue the Big Three carriers generate as an opportunity: "I anticipate us to be able to acquire quite a few of their customers, because I think our service will be better," she said, adding that Starlink Mobile could also eliminate dead zones and outperform terrestrial networks during natural disasters.

Investors reacted fast. Shares of AT&T, Verizon, and T-Mobile fell as much as 4% in after-hours trading following the call, wiping out an estimated $12.4 billion in combined market value, before settling into more modest declines the next morning — T-Mobile and Verizon down around 2%, AT&T off less than 2%.

Not everyone on Wall Street is convinced the plan will work. Dimitris Mavrakis, senior research director at ABI Research, wrote bluntly that "Elon Musk is nuts if he thinks 5G small cells with Starlink backhaul can offer better (and cheaper) service than AT&T, Verizon and T-Mobile," pointing to the difficulty of powering and siting large numbers of small cells. 

Mobile Experts founder Joe Madden agreed the business case is shakier than the technology, noting that negotiating rooftop access "building by building" has slowed similar efforts for 15 years. Analysts at MoffettNathanson have also floated the idea that Starlink's real endgame may still be an MVNO deal with one of the Big Three rather than building its own network from scratch.

For now, AT&T, T-Mobile, and Verizon have all previously said they're not interested in an MVNO arrangement with Starlink Mobile. Whether that holds as SpaceX ramps up its terrestrial ambitions is likely to remain a storyline through 2027.

Source: Yahoo Finance