Dear Fellow Investor,
Good morning. Happy Sunday!
I hope you’re enjoying the weekend.
But first, let’s talk about your cell phone bill.
On Thursday evening, SpaceX agreed to buy a nationwide slice of wireless airwaves from a private investment firm called Grain Management.
T-Mobile, AT&T and Verizon shares all fell on the news.
SpaceX shares went up.
One deal.
Three of the biggest phone companies in America knocked down in a single day.
If you’re like most people, you’re probably wondering what a rocket company has to do with your phone company.
Fair question. Let’s dig in.
What SpaceX Actually Bought
Think of wireless spectrum like lanes on a highway.
Every phone signal has to travel in a lane, and the government licenses who gets to use each one.
Some lanes carry a lot of traffic but don’t travel far, and they struggle to get through walls.
Low-band lanes are the opposite.
The signal travels a long way and goes right through buildings.
That’s what SpaceX bought — up to 14 megahertz of low-band spectrum in the 800 MHz range, across the whole country.
SpaceX said it closes “one of the key remaining technical gaps” for Starlink Mobile to become a major mobile carrier in the U.S.
It also said most phones people already carry support this band.
The deal still needs FCC approval, and neither side disclosed the price.
Now here’s the part I love.
That spectrum used to belong to T-Mobile.
T-Mobile sold it to Grain in August for $2.9 billion in cash plus Grain’s own 600 MHz licenses.
About two months later, it’s headed to the company that wants T-Mobile’s customers.
And T-Mobile is the exclusive U.S. carrier for the current version of Starlink’s satellite-to-phone service.
You can’t make this stuff up.
Why the Phone Companies Sold Off
SpaceX isn’t hiding its ambitions.
Back in August, SpaceX President Gwynne Shotwell said AT&T, Verizon and T-Mobile make roughly $600 billion a year combined.
Then she said this:
“I anticipate us to be able to acquire quite a few of their customers because I think our service will be better.”
This week, the FCC approved SpaceX’s application to launch 15,000 next-generation satellites for Starlink Mobile.
Starlink already serves more than 12 million customers in over 170 countries.
Shotwell has said the next-generation satellites start flying next year, with service starting at the end of next year.
So when SpaceX buys one more missing piece, the market does the math fast.
Two Things Can Be True
Now, I want to be fair here.
The big carriers have towers all over the country.
They have more spectrum than SpaceX.
They have decades of experience running nationwide networks.
Plenty of telecom executives have brushed off SpaceX’s plan.
They may be right about some of it.
But I’ve been doing this almost 35 years, and I’ve watched this movie too many times.
The incumbent says the newcomer can’t do it.
Then the newcomer keeps buying the pieces, one at a time, until it can.
I’m not telling you to dump your phone stocks Monday morning.
Building a network takes years.
I’m telling you to watch who keeps writing the checks.
Follow the Checks
Here’s the bigger pattern.
SpaceX has become the company everybody in space has to do business with.
NASA paid it to haul cargo.
Then NASA paid it $2.6 billion to carry astronauts.
Now NASA is paying it up to $843 million to bring the International Space Station down.
And SpaceX has agreed to pay EchoStar about $20 billion for spectrum.
But here’s what I keep coming back to.
The biggest gains haven’t always gone to SpaceX.
Often they’ve gone to the smaller companies standing next to it.
EchoStar owned spectrum SpaceX needed.
This week, so did Grain.
The next one I’m watching is about 250 miles above our heads.
The International Space Station was designed to last fifteen years.
It’s been up there for twenty-five.
And America can’t just leave the sky empty — China already has its own station, Tiangong, circling overhead.
When the ISS comes down, NASA won’t build the replacement itself.
A private company will build and run the next station, and NASA becomes the tenant.
NASA has told Congress it plans to spend roughly $1 billion a year on that service.
The company I’ve found has already started building.
Its design has passed NASA’s official review.
And it has already paid SpaceX $90 million to carry its station into orbit.
If it wins, it becomes a landlord to the U.S. government.
Most investors have never heard of it.
I’ve put together the full story on who it is and how the deal works.
Enjoy the rest of your weekend.
I’ll see you tomorrow.
“The Buck Stops Here,”
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Written by Dylan Jovine