- SpaceX reportedly held talks with Charter about a consumer mobile partnership
- A Charter deal could give Starlink Mobile help in urban areas, using Charter’s Wi-Fi hotspots and CBRS small cells to offload traffic
- But it still doesn’t solve SpaceX’s biggest problem: access to a nationwide terrestrial wireless network
If at first you don’t succeed, try, try again. That seems to be a theme prevailing in all the speculation surrounding SpaceX and its desire to become a bigger player in the U.S. wireless industry.
The latest buzz is that Elon Musk’s SpaceX held executive-level talks with Charter Communications about partnering on a consumer mobile phone offering, per a Friday Bloomberg report. That was the same day the Financial Times revealed that SpaceX told investors it plans to launch a new Starlink mobile service for U.S. consumers in a head-to-head face-off with AT&T, T-Mobile and Verizon.
All this comes as the Big 3 U.S. wireless carriers each say they’re not interested in doing an MVNO deal with SpaceX. Striking an MVNO with a mobile network operator would give SpaceX’s Starlink Mobile a terrestrial network to coincide with its satellite constellation, going beyond direct-to-device (D2D) offerings that target cellular dead zones.
That’s led to speculation about how SpaceX would achieve a bigger presence with consumers in the mobile market. Can it amass enough spectrum to build its own network? Or will it buy one of the existing national networks? Perhaps one of the Big 3 will blink and decide to do an MVNO with Musk after all?
SpaceX and Charter scenario
The Bloomberg article suggested Charter could run some of SpaceX’s phone traffic through its ground-based internet infrastructure, similar to what it does with its Spectrum Mobile offering, thereby helping SpaceX along its desired journey toward becoming more of a direct-to-consumer mobile phone provider. Charter declined to comment on the report.
Analysts are skeptical the MVNO agreement that Charter has with Verizon would withstand a change of control scenario.
“While Charter’s network of urban hotspots and small cells could help Starlink Mobile to narrow the structural coverage gap associated with a direct-to-cell satellite network, Charter can’t offer a solution that entirely closes the gap because it can’t provide Starlink Mobile subscribers with access to Verizon’s wireless network,” BNP Paribas Equity Research senior analyst Sam McHugh wrote in a note for investors on Monday.
As a result, “unless SpaceX buys Charter (and we aren’t sure about whether there are change of control provisions in the original cable MVNO), there is no way for a Charter-SpaceX partnership to remove the role of terrestrial cellular networks in the U.S. connectivity market,” he said.
One view is that Charter would offer Starlink Mobile customers access to its mostly urban network of Wi-Fi hotspots and CBRS small cells. Then Starlink could use satellite to provide mobile connectivity when its customers are in more rural areas.
But notably, McHugh said he wouldn’t be surprised if all these media reports are the latest attempt from Starlink to try to get an MVNO deal with one of the Big 3 wireless operators, “which we continue to see as having a low likelihood of success.”
What if SpaceX tries to buy a Big 3
As for M&A, SpaceX could try to buy one of the Big 3. Some analysts have identified T-Mobile as a likely target, given its lack of legacy wireline and current partnership with SpaceX on T-Satellite. That could be what motivated T-Mobile owner Deutsche Telekom to seek total ownership and control of its cash cow U.S. subsidiary in April, TD Cowen analysts said in a June 25 report for investors.
The analysts also suggested that in a defensive move, T-Mobile could acquire a cable company. Speculation about that has been going on for years, with T-Mobile CEO Srini Gopalan once again shooting down cable rumors during the company’s Q1 earnings call.
The TD Cowen analysts acknowledged that investors might roll their eyes on purchasing “yesterday’s technology” and it would be an overt contradiction to T-Mobile management’s messaging. However, a cable acquisition could serve two purposes: solve T-Mobile’s convergence strategy and force SpaceX to back off and look for another acquisition target.
Overall, the analysts are cautiously optimistic that the carriers will not budge and will stand in solidarity against an MVNO offer.
However, they noted that the SpaceX overhang doesn’t have an ending date, so while the wireless industry is otherwise in a fairly healthy condition, it will continue to make an impact on the Big 3 wireless stocks, all of which were down on Monday. Charter closed up about 9%, to $146.17.