Key Points
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The last time a small cell carrier tried to take on Verizon, T-Mobile, and AT&T, it didn’t fare that well.
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SpaceX is partnering with Qualcomm on network equipment and is rumored to be considering a purchase of Boost Mobile.
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SpaceX’s current success with Starlink suggests that launching a terrestrial mobile service could be the right move for the company.
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Space Exploration Technologies (NASDAQ:SPCX) recently announced a new partnership under which Qualcomm (NASDAQ:QCOM) will provide it with the network technology it needs to launch its forthcoming Starlink Mobile cellular carrier service.
It has been rumored for a while that Starlink was interested in getting into the mobile carrier business, but the deal with Qualcomm moves the company closer to attempting to directly compete with AT&T (NYSE:T), Verizon (NYSE:VZ), and T-Mobile (NASDAQ:TMUS).
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But the big three U.S. carriers won’t let Starlink steal market share from them without a fight, and if history is any indication, SpaceX has its work cut out for it.
Image source: Getty Images.
Starlink Mobile’s competitors are massive
To take on the established mobile carriers, SpaceX will rely in part on Qualcomm’s Dragonwing cellular infrastructure hardware and software for base stations across tens of thousands of new cellular sites.
Launching Starlink Mobile will be a major endeavor, as the business will need a massive footprint of ground-based cellular stations to compete with the established carriers. It won’t be able to rely entirely on its current satellites for all services. It also means that SpaceX will likely need to eventually rent tower space from American Tower or its peers.
But carving out space in the postpaid cellular market (which excludes tablet and smartwatch connections) won’t be easy. Here’s a quick look at how many postpaid connections T-Mobile, AT&T, and Verizon added during the third quarter:
| Carrier |
Net Additions in Q3 |
| Verizon |
406,000 |
| T-Mobile |
274,000 |
| AT&T |
379,000 |
Data sources: Verizon, T-Mobile, and AT&T.
All three were adding substantial numbers of new postpaid customers even in a relatively saturated market, which means none of them looks particularly vulnerable. What’s more, each company already has well over 100 million wireless mobile subscribers, making it even more difficult for SpaceX to compete.
History hasn’t been kind to fourth carriers
The most recent would-be challenger to the major carriers didn’t fare so well: Boost Mobile was once owned by Sprint, but was eventually sold to Dish as part of an agreement to secure FCC and Justice Department approval for the 2020 merger of T-Mobile and Sprint. Dish later merged with EchoStar, bringing Boost along with it.
For a while, Boost Mobile was the nation’s fourth cellular carrier. But even for a regulator-backed carrier, the financials didn’t work. Boost Mobile still exists, but it now operates only as a mobile virtual network operator (MVNO), meaning it rents spectrum from AT&T and other carriers, and sells plans under its Boost Mobile brand.
SpaceX has a few things working on its side
But while history may be working against SpaceX, the company has some clear distinctions that could help it chart a different path than Boost.
First, it has an established customer base that’s rapidly expanding. The Starlink satellite internet service ended the third quarter with 13.6 million subscribers, an 89% year-over-year increase. SpaceX could tap into that existing base to upsell customers on Starlink Mobile bundles and offer other incentives to get them to switch to its mobile service.
What’s more, SpaceX is reportedly considering buying Boost Mobile, which could give the company millions of mobile subscribers right off the bat as it builds out its own cellular network. Some projections say Starlink Mobile could amass 13% of the mobile market by 2036, giving the company 50 million U.S. subscribers.
Second, the existing Starlink service is already a huge success. In Q3, it generated nearly 40% of the company’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and accounted for about 36% of its total sales. Clearly, SpaceX knows how to scale an internet service business to grow subscribers and profit, and it could follow a similar path with a mobile service.
The one factor SpaceX shareholders should keep an eye on is how much it could cost to get Starlink Mobile up and running. SpaceX’s capital expenditures jumped about 185% year over year to $19.6 billion in the third quarter, mostly due to spending on artificial intelligence infrastructure.
Shareholders haven’t liked the company’s rapid increase in spending, and if Starlink Mobile costs more than expected, that could further weigh on SpaceX’s stock price.
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Tower, Qualcomm, and Space Exploration Technologies. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.
