- Elon Musk says the 800 MHz spectrum purchase from Grain represents the “last critical piece” of the spectrum puzzle for SpaceX
- SpaceX reportedly is paying $8 billion for the assets that were once on the market for about $3.6 billion
- Will SpaceX build out the spectrum or use it as leverage to strike an MVNO with the Big 3?
Boom! SpaceX just inked a deal to buy 14 megahertz of paired 800 MHz spectrum from Grain Management, giving Starlink Mobile a means to more aggressively challenge the Big 3 U.S. mobile carriers on the ground.
The companies didn’t disclose the purchase price but the Wall Street Journal, citing people familiar with the matter, said SpaceX will pay about $8 billion in cash for the assets.
“This is the last critical piece of the spectrum puzzle needed for SpaceX to provide complete phone coverage in America,” SpaceX CEO Elon Musk said Thursday on his social medial platform X.com.
Never mind for the moment that industry insiders immediately question the “complete phone coverage” scenario. The deal to buy Grain’s 800 MHz spectrum gives SpaceX a low-band swath of spectrum (albeit, not gigantic) to address the on-the-ground coverage problem that has plagued its “we will conquer all” mobile scenario.
FCC approval, then 'everywhere'
Once it receives Federal Communications Commission (FCC) approval – a shoo-in given FCC Chairman Brendan Carr’s penchant for all things space and Elon Musk – Starlink Mobile will deploy a “flexible architecture combining our satellite-to-mobile constellation in space with an advanced terrestrial deployment that can seamlessly connect devices everywhere,” SpaceX said in its press release.
This spectrum sits below the global 2 GHz spectrum that SpaceX is buying from EchoStar. While the 2 GHz spectrum will provide Starlink Mobile with high-bandwidth capacity in the United States, this new low-band 800 MHz spectrum will provide a coverage layer that allows signals to penetrate through walls and buildings. The company said that most existing mobile devices already support this 800 MHz band.
SpaceX supporters hailed the move. See some of the responses on X, here, here and here.
The spectrum acquisition comes on the heels of the FCC’s approval earlier this week of Starlink Mobile’s Gen2 constellation application, giving SpaceX permission to launch 15,000 satellites optimized to use the 2 GHz spectrum. According to SpaceX, the V2 satellites will deliver more than 100 times the bandwidth of its current generation, delivering high-speed service to unmodified devices around the world.
Shares in all three U.S. wireless carriers were down in early trading this morning. AT&T was down more than 6%, at $22.90. T-Mobile was down 10%, to $154.10, and Verizon was down 5.5%, at $43.13. Meanwhile, SpaceX shares were up about 1%, to $162.75.
“The spectrum transaction is obviously negative for the carriers as they clearly have a new bidder at the table going forward, especially as we consider Auction 115 next April,” wrote TD Cowen analyst Gregory Williams in an Oct. 8 note for investors. “Still, we believe the spectrum news takes a back seat to the press release that intentionally used words like ‘an advanced terrestrial deployment;’ ‘to become a major mobile carrier;’ penetrate ‘through walls and … in buildings.’”
SpaceX has put an emphasis on femtocells as part of its terrestrial network strategy, but the market is giving tower stocks a reason to smile. Crown Castle today was up 12%, to $77.30. American Tower was trading up 7% today, to $178.61, while SBA Communications was up 6%, to $180.53.
The 800 MHz was sitting in plain sight
The 800 MHZ deal with Grain certainly didn’t come out of nowhere.
As others and Fierce noted earlier this week, the option of acquiring low-band 800 MHz spectrum was certainly out there. Grain Management recently acquired this 800 MHz spectrum from T-Mobile and talked about using it to serve utilities before seeking FCC approval to adapt it for direct-to-device (D2D) services.
Prior to that, this swath of spectrum essentially had been on the sales block for several years, as Dish Network was set up to acquire it as part of the T-Mobile/Sprint deal. But Dish founder Charlie Ergen never had the cash to do so. The spectrum licenses date back to the days of Nextel Communications. Besides lack of cash, Dish didn’t have the devices readily available to support the 800 MHz spectrum.
New Street Research analyst David Barden said the reported value of $8 billion, or about $1.73/MHz/POP, is above what had been speculated to be Grain’s internal target of $6 billion, or $1.30/MHz/POP, for the 800 MHz spectrum.
Skepticism about SpaceX’s plans
Regarding Musk’s contention that this is the “last critical piece of the spectrum puzzle” needed for SpaceX to provide complete phone coverage in America, Barden said: “We are not so sure about that.”
For one thing, the Big 3 mobile operators have amassed far more spectrum over the decades than that comparatively tiny amount that SpaceX is getting. For another, it’s not currently compatible with SpaceX’s V1 or V2 D2D satellites, which are optimized for the EchoStar mid-band 2 GHz spectrum it acquired.
One take on the whole matter is it’s another way for SpaceX to bluff its way into getting an MVNO deal with a major U.S. carrier. Building a terrestrial network would take years and cost upwards of $80 billion; striking an MVNO deal would be a lot easier, TD Cowen’s Williams noted.
The CEOs of AT&T, T-Mobile and Verizon have all said they don’t want to do an MVNO deal with SpaceX and last week, they formalized the JV they announced to pool spectrum resources in an attempt to show solidarity.
LightShed Partners analysts Walter Piecyk and Joe Galone said they were struggling to see much substance behind the carriers’ JV. “They talk about pooling spectrum resources, yet we do now [know of] any actual spectrum assets to be contributed into the JV,” the wrote in an Oct. 9 blog.
“For now, it looks like a pretty weak response to a competitor spending billions acquiring actual spectrum. And if the JV ultimately becomes a way for the three carriers to coordinate efforts to keep SpaceX out of the market, it could raise serious antitrust questions,” the LightShed analysts said.
An MVNO spin-the-bottle game
One of the biggest games going on among wireless industry circles is: Who’s going to cave first? That is, which of the Big 3 mobile phone carriers will decide to do a deal with SpaceX.
The LightShed analysts pointed out that the first to sign with SpaceX will get the wholesale revenue and some influence over how SpaceX enters the market. “The other two get a new competitor without a partner to slow it down. At this point, it’s better to be SpaceX’s one partner than one of three carriers that said no.”
Read more about SpaceX and this 800 MHz spectrum on Fierce Network
SpaceX scores 15K-satellite win as FCC doubles down on D2D
Indoor cellular experts ponder SpaceX’s entry into wireless
Starlink Mobile’s $25B threat looms over US carriers
T-Mobile tees up 800 MHz for sale to Grain, with upshots for utilities
T-Mobile’s 800 MHz is for sale – who’s gonna buy it?
Dish says there’s zero chance it will buy T-Mobile’s 800 MHz spectrum