Elon Musk's space company is buying spectrum licenses to help build a mobile network to compete with telecom giants
By Patience Haggin and Drew FitzGerald
SpaceX reached a deal to buy cellular spectrum licenses from investment firm Grain Management, its biggest move yet into a wireless market dominated by traditional telecom companies.
The Elon Musk-led space company will pay about $8 billion in cash for the assets, according to people familiar with the matter. Grain and SpaceX had no comment on the value of the transaction.
The U.S. licenses, which are in the 800-megahertz band, are tailored for wireless service from cellphone towers rather than satellites. The spectrum could serve SpaceX's stated ambition of moving its Starlink satellite service beyond broadband into the wireless market to compete with the likes of AT&T and Verizon.
U.S. cellphone carrier stocks sank on the news. Shares in AT&T, Verizon and T-Mobile all fell more than 6% in post-close trading. SpaceX shares climbed about 3% to $165.10 after hours.
The Federal Communications Commission earlier this week approved SpaceX's bid to launch up to 15,000 satellites dedicated to mobile service.
The company said that upon FCC approval of the spectrum purchase, it will combine the growing constellation with "an advanced terrestrial deployment" to connect devices. It said its new spectrum will help cover places satellite links can't reach, including inside buildings.
SpaceX has offered basic wireless connections in remote areas through a T-Mobile partnership for more than a year. But it has been upgrading its Starlink Mobile network with newer satellites capable of handling more data.
Starlink still needs some terrestrial infrastructure, such as cell towers or rooftop equipment, to use the spectrum for mobile coverage, said Roger Entner, founder of telecom research firm Recon Analytics, whose clients include AT&T, Verizon and T-Mobile US.
Two months ago, SpaceX executives floated the idea of using small cells rather than traditional cell towers to support a mobile network. Building a system with traditional towers would likely cost billions of dollars to provide basic coverage, analysts have said.
SpaceX made an early commitment to the wireless market last year, reaching a roughly $17 billion cash-and-stock deal to obtain satellite-based spectrum rights from EchoStar. The purchase gave Musk's company a platform for beaming data to cellphones from space using its own reserved frequencies rather than through airwaves licensed from partner T-Mobile.
EchoStar later agreed to sell some ground-based cellular licenses to SpaceX for $2.6 billion. The purchase hinted at SpaceX's budding interest in wireless service, though the spectrum alone wasn't enough to launch a full-fledged cellphone network.
AT&T, Verizon and T-Mobile earlier this year teamed up to extend their service to remote areas over satellite links, a move widely viewed as a defensive tactic against potential SpaceX encroachment.