SpaceX mobile push sends Verizon, AT&T, T-Mobile shares down 4%

US telecom stocks fell as much as 4% in after-hours trading after SpaceX said it will build terrestrial mobile infrastructure to challenge Verizon, AT&T and T-Mobile.

"The spectrum that we purchased from EchoStar does have terrestrial components, so we definitely intend to build out terrestrial," Gwynne Shotwell, president of SpaceX, said during the company's first post-earnings call on Tuesday.

SpaceX acquired 65 MHz of wireless spectrum from EchoStar for $19.6 billion through two deals announced last year. Shotwell said the company will build the infrastructure needed to make Starlink "a true mobile service" and expects to win "quite a few" customers from the Big Three carriers.

The three largest US wireless carriers have invested hundreds of billions of dollars over three decades into spectrum, networks and subscriber acquisition. Analysts cautioned that SpaceX faces an uphill battle, with MoffettNathanson's Craig Moffett saying it's "extraordinarily challenging" for Starlink to compete within five years without an MVNO agreement.

The remarks mark SpaceX's clearest indication yet that it intends to pair its satellite network with ground-based infrastructure to offer a broader wireless service, moving beyond its current direct-to-device service for areas without cellular coverage.

Starlink and SpaceX's broader connectivity operations remain the company's primary financial engine, underpinning Elon Musk's expensive push into AI, data centers and next-generation rockets. SpaceX reported its first quarterly results as a public company on Tuesday, with revenue surging on strong Starlink growth.

Shotwell said she didn't want to discuss the cost of building out mobile services because the company has "great and new ideas" on how to do it, which she said would be capital efficient.

"It makes no sense for SpaceX to try to replicate what terrestrial players have built over 30 years with 1000 MHz between them, with 65 MHz," David Barden from New Street Research said.

Some investors said the market may be underestimating the potential disruption. "I definitely think what Elon said on the call about investors undervaluing that side of the business is absolutely correct in my mind," said David Wagner, portfolio manager at Aptus Capital Advisors. Wagner said traditional wireless carriers risk being outpaced by SpaceX's willingness to innovate.

Under its partnership with T-Mobile, SpaceX uses Starlink satellites to provide direct-to-cell connectivity for compatible smartphones outside traditional cellular coverage, complementing rather than competing with the carrier's network.

The three carriers together generate hundreds of billions of dollars in annual revenue, making them a lucrative target for SpaceX. But the incumbents' combined spectrum holdings of roughly 1,000 MHz versus SpaceX's 65 MHz give them a structural advantage that analysts say will be difficult to overcome in the near term.

This article is for informational purposes only and does not constitute investment advice.