SpaceX's mobile play: The 'best argument just got weaker' for carriers

SpaceX's ( SPCX ) move to buy nationwide 800 MHz spectrum closes the biggest technical gap in its bid for a true mobile product. Wall Street believes the pieces are in place for Elon Musk's rocket and satellite company to make the move, but there's still a way to go.

The portfolio includes up to 14 MHz of paired low-band spectrum. In its announcement , SpaceX said the spectrum "addresses one of the key remaining technical gaps that will pave the way for Starlink Mobile to become a major mobile carrier in the US."

Once it receives final FCC approval, SpaceX said Starlink Mobile will combine its satellite-to-mobile constellation with "an advanced terrestrial deployment," using its 2 GHz mid-band spectrum for capacity and the 800 MHz band for coverage that reaches customers "even when they are in buildings." SpaceX noted, "most existing mobile devices already support this underused band."

Evercore ISI analyst Kutgun Maral, who rates SpaceX Outperform with a $230 price target, saw SpaceX's move as "the clearest signal yet that Starlink Mobile is moving from a wholesale coverage layer for carrier partners toward a credible direct-to-consumer US service."

"The carriers' best argument just got weaker," Maral wrote. He added that owning a coverage layer means SpaceX now negotiates any MVNO "from a stronger position."

Maral cautioned that the deal is "more of a coverage fix than a capacity solution." Even with EchoStar's 65 MHz, SpaceX would hold about 79 MHz of low- and mid-band spectrum in the US, vs. 280 to 380 MHz each for AT&T, T-Mobile, and Verizon.

SpaceX management has said that next-generation mobile satellites will begin flying in 2027, with full 5G-quality service capable of being turned on in the first half of 2028, according to Evercore.

Also this week, the FCC approved SpaceX's application to launch 15,000 Gen2 Starlink Mobile satellites, which the company says will deliver more than 100 times the bandwidth of its current generation.

Mobile carriers like AT&T ( T ), T-Mobile ( TMUS ) and Verizon ( VZ ) slid on the news . Conversely, tower owners American Tower ( AMT ), Crown Castle ( CCI ) and SBA Communications ( SBAC ) rallied on hopes of future SpaceX terrestrial buildouts.

TD Cowen analyst Gregory Williams said the spectrum news "takes a back seat" to the release, which he said "intentionally used words like 'an advanced terrestrial deployment.'"

"We still believe SPCX wants an MVNO first; thus, SPCX could be bluffing," Williams wrote. "This could be a tactic, but taking SPCX on its word, this puts the carriers on notice."