An analyst sees Starlink's transition into a cell phone carrier as a problem for Apple and Samsung

SpaceX's purchase of radio frequencies for Starlink is putting pressure on mobile operators' stocks, but smartphone manufacturers could also be affected, according to Gene Munster, an analyst and managing partner at Deepwater Asset Management.

Against the backdrop of the SpaceX deal, U.S. telecommunications companies’ stocks lost $60 billion in market capitalization on October 9, according to the Financial Times. Verizon’s shares, in particular, had their worst day since 2002, falling 8.8%.

A TD Cowen analyst suggests that Elon Musk's strategy may be to force one of the big three U.S. telecom providers to allow Starlink onto its network as a virtual operator, or to drive down their stock prices and buy one of them outright.

Elon Musk's next move could be to create a smartphone designed specifically to work on the Starlink network, noted Gene Munster, a technology analyst and managing partner at Deepwater Asset Management, on the social media platform X. In his view, if that happens, SpaceX would pose a threat not only to telecommunications providers but also to smartphone manufacturers.

“Elon says he doesn’t want to release a smartphone,” Munster wrote. “I still think SpaceX will end up doing it. A smartphone developed in-house, tightly integrated with the Starlink mobile network, could offer features that carriers won’t be able to compete with, as well as cheaper connectivity.” According to the analyst, this could pose a threat to both Apple and Samsung. Moreover, for Samsung, Musk’s device could present a “more serious problem”: “Apple’s ecosystem of devices and services is much stronger,” Munster explained.

Rumors that SpaceX was developing its own gadget—a device for interacting with AI—had been circulating even before the company went public, although Musk himself denied them. Specifically, sources told The Wall Street Journal in July that such a device, resembling a phone, had already been developed.

SpaceX’s latest moves have sent a signal to telecom operators: the company could compete with them for subscribers, notes Yahoo Finance. On Thursday, SpaceX announced that it would acquire a nationwide portfolio of low-frequency spectrum. The deal strengthens the position of Musk’s satellite business, Starlink, and allows it to challenge the largest traditional wireless carriers across the United States, writes Yahoo Finance. Following this news, shares of AT&T, T-Mobile, and Verizon plummeted on Friday. Meanwhile, shares of cell tower owners rose, as investors anticipate that SpaceX will have to deploy ground-based infrastructure.

On Wall Street, there are concerns that Starlink could upset the established balance of power in the mobile communications market: the company could evolve from being a partner to carriers—providing coverage where there are no cell towers—into a direct competitor to AT&T, Verizon, and T-Mobile. The purchase of nationwide 800 MHz spectrum closes the biggest technical gap on SpaceX’s path to its own full-fledged mobile network, which will complement its direct satellite service for smartphones, notes Yahoo Finance. Wall Street believes the company already has all the necessary elements in place, but there is still a long way to go before the plan can be implemented, the publication writes.

— “We believe that the addition of the low-frequency spectrum makes Starlink a more compelling contender for the role of a full-fledged mobile operator, thanks to the ability of low frequencies to penetrate buildings more effectively,” Yahoo Finance quotes KeyBanc analyst Brandon Nispel as saying.

“This deal is ‘the clearest signal to date that Starlink Mobile is moving from its role as a wholesale coverage layer for partner carriers to a full-fledged direct service for U.S. consumers,’” said Evercore ISI analyst Kutgun Maral. According to him, SpaceX’s own radio frequency coverage allows the company to negotiate any agreement with an existing operator regarding the use of its network “from a stronger position,” Yahoo Finance quoted Maral as saying.

At the same time, Maral cautioned that the current deal to purchase spectrum “solves the coverage problem to a greater extent than the network capacity problem.” Even with EchoStar’s 65 MHz of spectrum, SpaceX will have about 79 MHz of low- and mid-frequency spectrum in the U.S., while AT&T, T-Mobile, and Verizon each have approximately 280–380 MHz.

— The news of the radio spectrum purchase itself “takes a back seat” to the wording in SpaceX’s press release, which deliberately used phrases like “cutting-edge ground infrastructure,” notes TD Cowen analyst Gregory Williams. “We still believe that SpaceX primarily wants to strike a deal with one of the operators to lease its network as a mobile virtual network operator (MVNO), so the company may be bluffing,” Williams wrote in a note cited by Yahoo Finance. “This could be a tactical move, but if we take SpaceX at its word, it’s a warning to carriers.”

Leasing capacity from an existing network is the cheapest option and the fastest way for SpaceX to launch its own mobile carrier, Williams emphasizes. He estimates that building its own network would cost “more than $80 billion” and take years. At the same time, he says, the three largest U.S. carriers still show no desire to “ever enter into an MVNO agreement with Starlink that could disrupt the industry.”

Williams speculates that SpaceX may be “creating the appearance” of preparing to build its own network in order to “deliberately drive down mobile operators’ multiples to a level at which one of them will either give in and sign an MVNO agreement, or will ultimately become a takeover target itself.”

According to Williams, SpaceX may be making a show of preparing to build its own network without taking on any irreversible commitments. For example, the company could enter into terminable leases for cell towers and fiber-optic infrastructure, as well as purchase more than $20 billion worth of Upper C-Band spectrum at the upcoming radio spectrum auction. If its own network ultimately proves unnecessary, this spectrum could be resold.

If no agreement is reached with the "Big Three" companies to launch a virtual operator, Williams believes it is possible that SpaceX could acquire EchoStar, whose equipment is still installed on more than 20,000 towers. He also named Verizon as another potential target.

"This whole situation could turn out to be a strategy aimed at acquiring Verizon," the analyst wrote. In June, Williams speculated that SpaceX might be aiming to acquire T-Mobile.

This article was AI-translated and verified by a human editor