SpaceX's $8 Billion Spectrum Deal Is a Shot at the Wireless Giants

SpaceX agreed Thursday to buy a nationwide portfolio of low-band wireless spectrum from private-equity firm Grain Management, its biggest move yet into the wireless business. The Wall Street Journal reported the deal is worth about $8 billion in cash.

The Journal cited people familiar with the matter. Neither company disclosed the terms of the deal, and SpaceX and Grain did not immediately respond to Reuters' request for comment.

The licenses sit in the 800-megahertz band. That is low-band spectrum: it travels long distances and passes through walls and tree cover. It is exactly the kind of airwave suited to the one problem satellite phones have never solved — working indoors.

SpaceX wants to pair the airwaves with its Starlink Mobile satellite-to-phone service. Starlink Mobile already holds 2 GHz mid-band spectrum globally for capacity, Reuters reported. The new low-band licenses fill in what satellites cannot do alone. Most current handsets already support the 800 MHz band, so customers would not need a special satellite phone.

The deal needs approval from the Federal Communications Commission. Earlier this week, the FCC approved SpaceX's bid to launch up to 15,000 satellites dedicated to mobile service, the Journal reported.

SpaceX said that once the FCC approves the purchase, it will combine the growing constellation with “an advanced terrestrial deployment” to connect devices — satellites alone still leave dead zones inside buildings. Roger Entner of the telecom research firm Recon Analytics said Starlink still needs some terrestrial infrastructure, such as cell towers or rooftop equipment, to use the spectrum for mobile coverage.

Markets got the message fast. In Friday premarket trading, T-Mobile, Verizon and AT&T fell 5 to 6 percent, Reuters reported. In Europe, the STOXX Europe 600 Telecommunications index dropped 3.3 percent to its lowest level since February. Deutsche Telekom fell 8 percent, Vodafone 4.5 percent, Orange 3.4 percent and Telefonica 3.3 percent. SpaceX shares rose about 3.6 percent.

Tower operators went the other way. American Tower, Crown Castle and SBA Communications rose 5 to 6 percent. Investors are betting that even a satellite-heavy wireless network needs towers, rooftops and small cells. Morgan Stanley called the deal “incrementally constructive” for tower companies and said any threat to established carriers would materialize gradually, starting in rural markets.

The carriers are not standing still. Reuters reported that AT&T, Verizon and T-Mobile formed a satellite-focused joint venture in May, a move some analysts read as a response to the SpaceX threat.

The spectrum traces back to T-Mobile. The carrier transferred its nationwide 800 MHz portfolio to Grain Management earlier this year, according to TechCentral. SpaceX is now buying it back out of private equity hands — pending the FCC's sign-off — to take the wireless carriers on in their own airwaves.