- SpaceX’s prospectus made it clear that it intends for Starlink to operate in urban and suburban areas, as well as rural
- Next-generation Starlink Mobile satellites, combined with SpaceX’s spectrum purchase from EchoStar, are designed to provide high bandwidth and low-latency connectivity directly to end-user devices
- Wolfe Research suggests the best outcome for the U.S. telecom industry involves Starlink buying one of the Big 3
Of all the analyses coming out ahead of SpaceX’s big IPO, one in particular stands out.
First, some background. All three of the big mobile network operators (MNOs) in the U.S. have said “no” to an MVNO deal with Starlink, SpaceX’s most profitable unit. But to fulfill Starlink Mobile’s ambitions as laid out in SpaceX’s S-1 SEC filing, the general consensus is it needs a terrestrial network, and without an MVNO, the only way to get that is to build it themselves or buy one.
According to analysts at Wolfe Research, the best outcome for the U.S. telecom industry is if Starlink were to buy one of the U.S.’s three mobile networks. “All parties should root for that,” the analyst firm said in a June 5 note for investors.
Explanation, please
Fierce reached out to Peter Supino, senior analyst at Wolfe Research, for more info on their reasoning.
He said their view is based on two assumptions. One is that the most important determinant of telecom profitability is the number of major competitors in a market, so if Starlink Mobile becomes No. 4, then there’s less profitability across the market.
The second assumption is if Starlink is denied access to an MVNO through the Big 3, then it will eventually build its own network, and there again, that puts the U.S. wireless industry in a market structure where there are four competitors.
“A better outcome for everybody, from a profitability perspective, would be that that doesn’t happen and a way for that not to happen is to actually buy a network,” he told Fierce.
Of the three, which one would be most advantageous for Starlink to buy?
T-Mobile, for two reasons, he said. “First, because it is a wireless-only network, and we imagine that Starlink doesn't need or want to own an existing wireline telecom network,” he said.
“The second reason is because Starlink might want to bid for T-Mobile by bidding for [parent company] Deutsche Telekom and if it were to do that, it would also gain control of a network in Germany and Austria.”
Of course, no one knows how the German executives would react to such a maneuver. Or how any seasoned telecom executive at other operators would react, for that matter. It bears noting that this is all speculation and no one is saying negotiations are underway.
But it is an “anything can happen” kind of world these days – and the question has come up before.
“To be clear, we’re not going to put the other carriers out of business. They’re still going to be around because they own a lot of spectrum,” SpaceX founder and probably soon-to-be trillionaire Elon Musk said during the All-In Summit last year.
He was asked: Could he buy a wireless carrier, like Verizon? “It’s not out of the question,” Musk answered with a smile. “I suppose that may happen.”
MVNO opposition
As for the U.S. carriers collectively, Supino said their opposition to doing an MVNO with Starlink suggests they’re in agreement with Wolfe Research’s conclusion that the number of competitors in a single market is the No. 1 determinant of profitability, and they’d probably like to prevent Starlink from competing.
Some might say that if Musk wanted to get into the terrestrial mobile business, he could have bought the open RAN network that Dish Network built for the Boost Mobile brand. Instead, SpaceX bought 65 megahertz of spectrum from EchoStar through two separate agreements, and it qualified to bid in the AWS-3 auction that is currently going on at the Federal Communications Commission (FCC).
Roger Entner, founder of Recon Analytics, said it doesn’t make sense for Musk to buy one of the three big U.S. telcos. “If he wants to be an MNO, he will build it from scratch,” he told Fierce.
Who knows? Shortly before the AWS-3 auction opened, EchoStar filed a waiver request with the FCC listing all the spectrum it expects to sell since it’s no longer vying to be a facilities-based carrier. It’s quite a bit: 700 MHz, paired AWS-3, CBRS, C-Band, MVDDS and millimeter wave licenses.
With a market cap of $1.77 trillion, it would seem as though Musk & Company will be able to do just about anything, including buying as much fallow spectrum as they can drum up.