SpaceX plans to purchase Grain Management's 800 MHz spectrum portfolio in a move to bolster its mobile ambitions. The news is lifting cell-tower stocks.
Crown Castle, American Tower and SBA Communications shares rallied after SpaceX struck a definitive deal for nationwide 800 MHz spectrum
SpaceX just made a move that could position its Starlink business to become a "major mobile carrier," the company shared in a Thursday press release.
On Thursday, SpaceX (SPCX) reached a definitive agreement with the digital-infrastructure investment firm Grain Management to purchase Grain's nationwide 800 MHz spectrum portfolio. The acquisition would give SpaceX government-issued licenses granting the exclusive right to transmit wireless data over specific low-band radio frequencies across designated geographic areas.
Acquiring Grain Management's 800 MHz spectrum gives Starlink's mobile ambitions a major boost, providing the groundwork for cellular networks. Upon FCC approval, Starlink Mobile will combine its satellite-to-mobile constellation in space with its newly acquired terrestrial network. Shares of SpaceX rose 2% in after-hours trading.
Meanwhile, shares of traditional wireless operators fell. Verizon Communications shares (VZ) were off almost 6%, while AT&T (T) and T-Mobile US shares $(TMUS)$ were down more than 6%.
In a Thursday note, Bernstein analyst Madison Rezaei said the acquisition highlights the continuing importance of traditional cell towers. It also makes the upcoming launch of Starlink Mobile, slated for 2027, more cost-effective, as low-bandwidth spectrum requires fewer cell towers than higher-frequency bands.
"Buying spectrum is not a commitment to build a nationwide network," Rezaei wrote. "But this is the spectrum we thought SpaceX needed to make that option more credible - and less expensive."
The announcement was good news for shares of tower companies, as SpaceX's mobile ambitions signal a potential resurgence in demand for cell towers. In Thursday's extended session, Crown Castle's stock $(CCI)$ rose 7%, American Tower's stock $(AMT)$ climbed 5% and SBA Communications shares (SBAC) rose 6%.
Tower companies have seen their valuations come down in the past few years as wireless carriers pulled back spending after the initial 5G buildout. For example, shares of Crown Castle have fallen almost 60% over five years.
"Tower multiples are deeply depressed, and the stocks are looking for a catalyst against a rising-rate backdrop," Rezaei wrote, adding that the deal "could put some wind back in the TowerCos' sails."
Across various coverage scenarios, Bernstein estimates SpaceX's total network cost would span $50 billion to $130 billion and require anywhere from 30,000 to 120,000 tower locations. Local zoning, power and labor constraints cap new U.S. tower construction at just 1,200 to 2,000 structures per year, meaning that SpaceX would have to lease existing space from major tower operators. As a result, American Tower, Crown Castle and SBA should be well-positioned to capture new rental revenue, according to Rezaei.
-Christine Ji