SpaceX agrees to buy spectrum for about $8 billion as telecom stocks fall
Key Facts
SpaceX has agreed to buy Grain Management’s entire nationwide portfolio of 800 MHz spectrum, paving the way for an expansion of Starlink Mobile services as shares of U.S. telecom operators fell. Reuters, citing a Wall Street Journal report based on people familiar with the matter, said the price was about $8 billion in cash. The agreement covers 100% of Grain’s nationwide portfolio and remains subject to approval by the U.S. Federal Communications Commission. FCC Chairman Brendan Carr said he expected "more investment and more opportunities for a range of service providers" in response to the agreement. Investors reacted swiftly after the announcement, with shares of major telecom companies falling in after-hours trading, according to Investing.com.
Most current mobile phones support the 800 MHz band, according to Reuters, making the spectrum covered by the agreement important for direct-to-device satellite services. Low-band frequencies can travel long distances and penetrate walls and tree cover. These characteristics help address a technical obstacle to satellite communications reaching users’ devices. SpaceX said it would combine its growing satellite constellation with an "advanced terrestrial deployment" to cover places satellites cannot reach, including inside buildings. Alongside the spectrum agreement, the FCC approved an application for the second-generation Starlink Mobile constellation during the week of the announcement, allowing the launch of 15,000 satellites, according to the Reuters report.
Grain’s portfolio stems from an earlier deal with T-Mobile, under which the carrier transferred its 800 MHz spectrum to the investment management firm. T-Mobile said it received $2.9 billion in cash, along with all of Grain’s 600 MHz licences. SpaceX also has an earlier agreement to buy spectrum licences from EchoStar, according to the latter’s filing with the U.S. Securities and Exchange Commission. The initial agreement with EchoStar set a price of $17 billion for the licence deal. An amendment then added a further $2.6 billion for additional spectrum, with that additional consideration to be paid entirely in SpaceX shares.
Among traditional operators, AT&T, T-Mobile and Verizon announced an agreement to establish a joint venture to expand satellite coverage in underserved U.S. areas. According to a Verizon statement, the operators’ existing agreements with satellite companies will continue under the joint venture arrangements. The venture aims to achieve industry-wide device compatibility through standardised specifications for satellite communications services. These efforts include operating system providers, developers and manufacturers, according to the same statement. The companies’ collaboration thus combines expanding coverage in the targeted areas with work on device compatibility, while retaining the satellite partnerships each operator has established.
Following the announcement of the SpaceX agreement, AT&T shares fell 6.75% in after-hours trading, according to Investing.com. T-Mobile shares dropped 5.4%, while Verizon fell 5% over the same period. In a subsequent update during the trading session, Reuters reported that T-Mobile’s losses reached 13.2%. That took the stock to its lowest level in more than 33 months, according to the agency. SpaceX shares, meanwhile, rose 1.2% in afternoon trading, according to the Reuters update. Shares of telecom tower companies bucked the sector’s selloff as investors bet on additional demand for the terrestrial infrastructure needed for communications services.
FCC approval remains a condition for completing the purchase of Grain’s portfolio, while ambitions to compete more broadly in cities require resources beyond the agreed spectrum. Morgan Stanley analysts said such competition would require "substantially more terrestrial communications infrastructure and spectrum", according to Reuters. SpaceX’s plan to combine satellites with terrestrial deployment includes indoor coverage among its expansion objectives. The EchoStar deal, meanwhile, has a licence transition timetable set out in the company’s SEC filing. EchoStar expected to complete the transition of spectrum licences to SpaceX on or around 30 November 2027.