American Tower Shares Jump 9.3% as Investors Bet on SpaceX Expansion
Key Facts
American Tower shares rose about 9.3% at the close on Friday, October 9, according to the Associated Press, as investors bet on potential demand for towers from SpaceX's expansion into mobile services. The gains followed the announcement of a deal for the space company to acquire a nationwide spectrum portfolio owned by Grain Management. The stock had risen 8.6% by 11:35 a.m. Eastern time, according to The Motley Fool. Other companies in the sector also advanced, with Crown Castle shares closing up 15.6%, according to the Associated Press. Benzinga linked tower owners' gains to expectations that SpaceX would lease sites on existing communications towers to support its expansion.
The deal includes the purchase of 100% of Grain Management's nationwide portfolio in the 800 MHz band, according to Reuters, with the acquisition remaining subject to Federal Communications Commission approval. Reuters cited the Wall Street Journal, which reported, citing people familiar with the matter, that the price was about $8 billion in cash. The portfolio had passed to Grain from T-Mobile in an earlier transaction, according to the carrier's statement on the completion of the sale. T-Mobile received $2.9 billion in cash in that transaction, along with all of Grain's licenses in the 600 MHz band. The earlier deal thus combined cash consideration with an exchange of spectrum licenses, while the newspaper reported cash consideration for SpaceX's planned acquisition.
The significance of the targeted spectrum lies in the characteristics of low frequencies and their ability to reach inside buildings, according to Reuters. These frequencies can penetrate dense obstacles that block signals. That helps address the problem of delivering mobile service to users inside buildings. Most current mobile phones also support the frequency band covered by the deal, according to the agency. This compatibility allows the service to work on devices users already own, without requiring them to buy a dedicated satellite phone.
Elsewhere in the sector, AT&T shares closed Friday's session down 9.8%, according to Axios. Verizon shares fell 8.8% in the same session. T-Mobile shares declined 13.3%, the largest drop among the carriers mentioned. The companies had entered into a joint venture agreement to expand satellite coverage in U.S. areas with limited terrestrial service, according to a Verizon statement. The statement said their existing agreements with satellite providers would remain in effect, with partners able to continue connectivity initiatives independently.
American Tower's gains follow results showing second-quarter revenue rose 4.7% year on year to $2,749 million, according to its filing with the U.S. Securities and Exchange Commission. Adjusted funds from operations attributable to shareholders rose 3.8% to $1,264 million over the same period. The chief executive attributed the strong results to demand for tower leasing worldwide. He also cited "record leasing activity at CoreSite" among the factors supporting the company's performance. He included operational performance among the drivers of the strong results listed in the filing.
As part of SpaceX's expansion, the Federal Communications Commission approved the second-generation Starlink Mobile constellation during the week the deal was announced, according to Reuters. The approval allows the launch of 15,000 satellites. But an analysis published by Investing.com, citing Bernstein, stressed that "buying spectrum is not a commitment to build a network." The analysis described the rally in tower stocks as based on a future possibility rather than a signed lease. SpaceX officials said they plan to launch the mobile services business in late 2027, according to Axios.