SpaceX has reached an agreement to purchase cellular spectrum licenses from investment firm Grain Management. This marks the company's largest move to date into the wireless communications market, which is currently dominated by traditional telecom companies.

According to people familiar with the matter, the space company led by Elon Musk will pay approximately $8 billion in cash to acquire these assets. Neither Grain nor SpaceX commented on the transaction amount. The U.S. spectrum licenses cover the 800 MHz band and are suitable for providing wireless services through cell towers rather than satellites.

These spectrum assets could help SpaceX achieve its stated goal of expanding its Starlink satellite service from broadband into the wireless communications market, competing with companies like AT&T and Verizon. Following the news, shares of U.S. mobile carriers fell sharply. AT&T, Verizon, and T-Mobile all dropped more than 6% in after-hours trading. SpaceX shares rose about 3% after hours to $165.10.

The Federal Communications Commission earlier this week approved SpaceX's application to launch up to 15,000 satellites dedicated to mobile communications. The company said that after the spectrum acquisition receives FCC approval, it will combine its growing satellite constellation with "advanced ground deployment" to provide connectivity to devices. The company stated that the new spectrum will help cover areas that satellite links cannot reach, including inside buildings.

For over a year, SpaceX has provided basic wireless connectivity to remote areas through its partnership with T-Mobile. However, the company has been upgrading its Starlink Mobile network with newer satellites capable of handling more data. Roger Entner, founder of telecom research firm Recon Analytics, said Starlink still needs some ground infrastructure, such as cell towers or rooftop equipment, to use this spectrum for mobile communications coverage. Recon Analytics' clients include AT&T, Verizon, and T-Mobile US.

Two months ago, SpaceX executives proposed the idea of using small base stations instead of traditional cell towers to support mobile communications networks. Analysts say building a system with traditional towers to provide basic coverage could require billions of dollars in investment. SpaceX began positioning itself in the wireless communications market last year, reaching a cash-and-stock deal worth approximately $17 billion to acquire satellite spectrum usage rights from EchoStar.

This acquisition provided Musk's company with a platform to transmit data from space to phones using its own dedicated frequencies, rather than using spectrum licensed by partner T-Mobile. EchoStar subsequently agreed to sell some terrestrial cellular spectrum licenses to SpaceX for $2.6 billion. This acquisition hinted at SpaceX's growing interest in wireless communications services, but these spectrum assets alone were not enough to launch a fully functional mobile communications network.

AT&T, Verizon, and T-Mobile joined forces earlier this year to extend their respective services to remote areas via satellite links. This move is widely seen as a defensive strategy against potential market encroachment by SpaceX.