- The rumored talks are for 80,000 wireless towers
- Earlier this week, Elon Musk said there are behind-the-scenes plans for Starlink Mobile, which the telecom community hasn’t been aware of
- But two analyst groups today question whether the tower deals are just SpaceX’s final bluff in order to secure an MVNO deal
Wow, Bloomberg is reporting that SpaceX aims to secure access to 80,000 wireless towers for its Starlink Mobile network.
Ruhell Amin with Bloomberg Television said, “If we look at SpaceX as a business, connectivity accounts for about $5.2 billion of revenue in the most recent quarter, which is about 36% of sales.” It’s a very profitable part of the business, as well, he said, referring to SpaceX’s Starlink broadband service. He said the company has the cash and the balance sheet to really move into the mobile space.
Bloomberg’s report specifically cited Crown Castle, and that company’s stock is up more than 9% today.
It was just earlier this week, during SpaceX’s Q3 earnings call, that SpaceX CEO Elon Musk said Starlink Mobile’s game plan was too big to explain during a one-hour earnings call. Musk said, “I think we probably should do a longer presentation on the game plan for Starlink connectivity and why we think it will ultimately be a business that generates several hundred billion dollars in revenue a year.”
And in an X post Musk said, “We definitely need to explain this in detail. Veterans of the cellular industry look at the chess board of existing pieces and don’t see a solution. They don’t understand that SpaceX is developing entirely new pieces that fundamentally alter the strategic landscape.”
Of today’s Bloomberg report, New Street Research analyst David Barden wrote, “Whispers of a SpaceX build are growing louder.” He said SpaceX seems to have evolved its terrestrial deployment plans from femtocells, which New Street considers “not feasible,” to a combination of small cells and now towers.
Is it all just a big bluff?
But New Street questions whether Starlink is serious about a tower deal or if it’s just considering all its options.
“In our conversations with the company, they continue to say they would like to secure an MVNO from one of the U.S. carriers,” wrote Barden. “If they get an MVNO, a full tower buildout is likely reduced. They have shared a buildout and MVNO are not mutually exclusive.”
“We still would like to see Elon’s presentation on SpaceX’s mobile strategy before fully buying into the hype,” Barden concluded.
BNP Paribas analyst Sam McHugh said it’s impossible to know if the tower news is a bluff by SpaceX to try and secure an MVNO deal with the American wireless carriers.
For their part, T-Mobile, Verizon and AT&T are adamantly opposed to giving SpaceX an MVNO deal. And they’ve created a joint venture to expand their wireless coverage via satellite technology using a variety of low-Earth-orbit (LEO) operators.
McHugh said if SpaceX does sign deals with one or more tower companies it will be making commitments that won’t be easy to extricate itself from. It won’t be able to cancel these contracts without payments on the scale of the lifetime lease costs.
McHugh said SpaceX would need to spend at least $100 billion to build a terrestrial mobile network, if it goes that route via the tower leases. “This excludes the cost of any additional spectrum, which, in this scenario, they would need,” he said.
SpaceX has already acquired spectrum from EchoStar, and it’s in the process of buying spectrum from Grain Management. In addition, the Federal Communications Commission has cleared SpaceX's application to acquire three spectrum licenses from Mississippi-based Tristar License Group.
Similar to New Street Research, the analysts at BNP Paribas still think SpaceX is hoping for an MVNO deal with one or more of the big three wireless carriers.
“Since the beginning of the year investor feedback has consistently been that SpaceX expects to get an MVNO in the U.S., and their strategy at the beginning looked a lot like the route the cable companies used (buy spectrum and use as a bargaining chip),” wrote McHugh. “But the telcos are not spectrum constrained like Verizon was back in the early 2010’s, and so this strategy has not worked, leaving SpaceX with the unenviable task of building bottom up if they have a genuine ambition of being a 4th carrier.”
He said if SpaceX does want to build its own terrestrial network in the U.S., putting radios and antennas on 80,000 towers is the right first step. BNP estimates that AT&T and Verizon each have about 65,000-75,000 towers, and T-Mobile has disclosed about 85,000 towers.
“If SpaceX stood up a network with 80,000 macro sites, its coverage would be on par with the Big Three,” said McHugh. “A buildout to 80k towers that then seamlessly combines with an advanced network of 15,000 mobile satellites to create continuous, ubiquitous coverage has a shot at being differentiated enough to make it.”
In terms of today’s news about striking deals with tower companies, McHugh said, “This is the last bluff one would pull to try to convince one of the Big Three carriers to break ranks and agree to an MVNO.”
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