U.S., Canadian and European telecom stocks were among the top decliners on their respective benchmarks on Friday after SpaceX’s SPCX-Q acquisition of low-band spectrum heightened concerns over growing competition from satellite-based mobile services.
With the deal, SpaceX aims to allow Starlink Mobile to bypass conventional cell towers where possible, and compete with the big wireless carriers on both broad coverage and reliable indoor service, potentially positioning satellite connectivity as a mainstream alternative to traditional cellular networks.
T-Mobile US TMUS-Q slid 9.1 per cent to its lowest level in over 33 months, AT&T dropped T-N 7.4 per cent and Verizon VZ-N lost 5.9 per cent, with those two stocks hitting their lowest in over two months.
All three were the biggest percentage decliners on the S&P 500 in early trading.
In sympathy with the U.S. move, the TSX telecom index was down 4.5%. BCE was down nearly 5% at midday.
“The implications for AT&T, T-Mobile, and Verizon are somewhat negative: their defenses against low-band spectrum claims are weakening,” said Kutgun Maral, media, cable & telecom equity research analyst at Evercore ISI.
In Europe, Deutsche Telekom, the largest telecom operator in the region by market value, fell 7.1 per cent, France’s Orange lost 1.8 per cent and Spain’s Telefonica slipped 3.3 per cent.
The pan-continental STOXX 600 Telecommunications index dropped over 2.4 per cent to its lowest level since Jan. 30.
Shares in Airtel Africa, Vodafone and BT Group were the biggest losers on London’s FTSE 100 index, falling between 1.7 per cent and 4.3 per cent.
The slide came after reports that SpaceX had agreed to acquire private-equity firm Grain Management’s nationwide 800 MHz spectrum portfolio in a deal valued at about US$8-billion, bolstering the company’s ambitions in satellite-to-cellular connectivity.
“This strategic shift places SpaceX in a stronger negotiating position and highlights an evolving competitive landscape in the telecom sector, reminding investors of the parallel trends seen in fixed wireless services over the last decade,” added Maral.
Low-band spectrum can travel longer distances and penetrate buildings and other obstacles more effectively than higher-frequency airwaves, enabling SpaceX’s Starlink Mobile push.
While the companies did not share financial terms of the deal, the Wall Street Journal reported, citing sources, that it is worth US$8-billion.
SpaceX shares rose 2.2 per cent after announcing the acquisition, which remains subject to regulatory approval.
Towers buck selloff
Telecom tower operators bucked the sector-wide selloff, as investors bet SpaceX’s wireless ambitions could ultimately drive demand for additional terrestrial infrastructure.
American Tower AMT-N, Crown Castle CCI-N and SBA Communications SBAC-Q advanced between 7.6 per cent and 12.6 per cent.
Morgan Stanley said the transaction was “incrementally constructive” for tower operators, noting that even a satellite-centric network could require deployments of towers, rooftops and small cells, while broader urban competition would require substantially more terrestrial infrastructure and spectrum.
With files from Globe staff