Musk buys T-Mobile’s spectrum for $8 billion, then threatens the entire U.S. telecom industry—while the Big Three lose $36 billion!
SpaceX has just announced the acquisition of a batch of wireless spectrum, and Wall Street responded by selling off shares of America’s three major carriers—T-Mobile, AT&T, and Verizon—wiping out a combined $36 billion in market value. T-Mobile plunged 13.3% in a single day, even though Musk hasn’t yet begun aggressively poaching its customers.
The most intriguing part of the story is the middleman, Grain Management.
In August, T-Mobile sold the batch of 800 MHz spectrum to Grain for $2.9 billion in cash and another batch of 600 MHz spectrum.
Just two months later, Grain resold it to SpaceX for a reported price of around $8 billion.
Although T-Mobile was required to sell the spectrum as a regulatory condition, and retained the right to a share of some future proceeds, the deal is still deeply ironic: an asset it once owned has changed hands and become a weapon its competitor can use to attack its market.
Why was Musk willing to pay $8 billion?
Because low-band 800 MHz signals travel long distances and penetrate walls well, helping make up for Starlink’s weaker coverage in cities and indoors.
Once satellite and terrestrial networks are connected, Starlink could evolve from supplementing traditional carriers’ coverage to becoming a carrier in its own right, charging consumers a monthly fee for mobile service.
SpaceX spent $8 billion to buy the opportunity to enter the mobile communications market of the future. Wall Street, meanwhile, immediately marked down the value of the Big Three carriers’ future cash flows.
What makes traditional telecom companies so valuable is the monthly phone bills paid by tens of millions of subscribers. If Musk manages to win over some of those customers—or forces carriers to cut prices and invest more in their networks—even a small change in long-term profit expectations, multiplied across such a vast customer base, could erase hundreds of billions of dollars in value.
It reminds me of that classic capitalist joke: capitalists will even sell you the rope to hang them, as long as the price is right.
Grain made money trading spectrum, Musk is betting on decades of future communications revenue, and the Big Three have already paid the price in lost market value.
As the mantis stalks the cicada, the oriole waits behind.
SpaceX has just announced the acquisition of a batch of wireless spectrum, and Wall Street responded by selling off shares of America’s three major carriers—T-Mobile, AT&T, and Verizon—wiping out a combined $36 billion in market value. T-Mobile plunged 13.3% in a single day, even though Musk hasn’t yet begun aggressively poaching its customers.
The most intriguing part of the story is the middleman, Grain Management.
In August, T-Mobile sold the batch of 800 MHz spectrum to Grain for $2.9 billion in cash and another batch of 600 MHz spectrum.
Just two months later, Grain resold it to SpaceX for a reported price of around $8 billion.
Although T-Mobile was required to sell the spectrum as a regulatory condition, and retained the right to a share of some future proceeds, the deal is still deeply ironic: an asset it once owned has changed hands and become a weapon its competitor can use to attack its market.
Why was Musk willing to pay $8 billion?
Because low-band 800 MHz signals travel long distances and penetrate walls well, helping make up for Starlink’s weaker coverage in cities and indoors.
Once satellite and terrestrial networks are connected, Starlink could evolve from supplementing traditional carriers’ coverage to becoming a carrier in its own right, charging consumers a monthly fee for mobile service.
SpaceX spent $8 billion to buy the opportunity to enter the mobile communications market of the future. Wall Street, meanwhile, immediately marked down the value of the Big Three carriers’ future cash flows.
What makes traditional telecom companies so valuable is the monthly phone bills paid by tens of millions of subscribers. If Musk manages to win over some of those customers—or forces carriers to cut prices and invest more in their networks—even a small change in long-term profit expectations, multiplied across such a vast customer base, could erase hundreds of billions of dollars in value.
It reminds me of that classic capitalist joke: capitalists will even sell you the rope to hang them, as long as the price is right.
Grain made money trading spectrum, Musk is betting on decades of future communications revenue, and the Big Three have already paid the price in lost market value.
As the mantis stalks the cicada, the oriole waits behind.