SpaceX Wants 80,000 Cell Sites to Take On AT&T and Verizon, and the Carriers Lost Nearly $28 Billion in a Day

Elon Musk's plan to build a fourth US phone carrier just got a lot more concrete, and Wall Street split in two. SpaceX is in talks with tower companies, including Crown Castle, to secure access to at least 80,000 US cell sites, people familiar with the matter told Bloomberg late Thursday.

On Friday, the carriers paid for it. AT&T and T-Mobile each closed down more than 7% and Verizon slipped 1%, together shedding nearly $28 billion in market value, according to Yahoo Finance. The landlords cheered. Crown Castle jumped 9% to its highest close since June, American Tower and SBA Communications each rose 3% or more, and tower stocks added about $7 billion.

Nothing is signed. The talks are far from a formal lease. But the market reaction says investors take the threat seriously.

Half the towers in America

The number is huge. The US has about 158,500 purpose built cell towers, according to the Wireless Infrastructure Association, so 80,000 sites is roughly half of them. Crown Castle owns about 40,000 US towers, American Tower about 41,000 in the US and Canada, and privately held Vertical Bridge about 18,000, Reuters reported. Leasing agreements could run into the billions of dollars.

Musk has been vocal about wanting a standalone carrier built from scratch, and doing that on land is expensive. TD Cowen estimated a nationwide terrestrial network would cost more than $80 billion and take many years and billions more in spending.

Crown Castle is not hiding its interest. Asked on Wednesday's earnings call about leasing to SpaceX and Amazon, CEO Chris Hillabrant said: "You can assume that we're talking to all parties." He declined to discuss specific customers.

The landlords and their biggest tenants

The odd part is who is cheering. AT&T, Verizon and T-Mobile bring in about 85% of American Tower's US and Canada revenue. The tower owners are celebrating a new tenant whose stated goal is to take business from their biggest customers.

Musk has now rattled the sector twice this month. On October 9, SpaceX struck a deal reportedly worth about $8 billion for a nationwide block of airwaves, and AT&T and Verizon suffered their worst one day falls in more than two decades. Since the October 8 close, Crown Castle is up 24% and AT&T is down 15%.

The pressure reached Europe too. Deutsche Telekom, which owns more than 50% of T-Mobile, fell 3.2%, Reuters reported Friday.

Years away, priced in now

Bernstein analysts say the real fight is far off but the damage is already here. "The competitive impact may still be years away, but anticipation alone, reinforced by each successive spectrum and infrastructure move, is likely to remain an overhang on sector sentiment," they wrote in a note. They added that a wholesale MVNO deal with SpaceX may not appeal to the carriers, and that a united front against one has done little to lift their shares. Becoming a true rival still takes years of work and a terrestrial network.

SpaceX already has pieces in place. The FCC approved its plan to launch 15,000 satellites built to connect directly to standard smartphones, and the spectrum purchase is meant to turn Starlink into a standalone network.

Some see the tower talks as a bargaining chip in SpaceX's dealings with the carriers, and better satellites could mean it needs fewer towers in the end. The scale gap is stark either way. SpaceX is worth about $2 trillion, roughly three times all six phone and tower companies combined, by Yahoo's math. American Tower reports earnings on Tuesday, the next chance to hear whether SpaceX is lining up as a customer.

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