By William Gavin

Both companies' stocks are having a terrible week as the threat of Starlink looms

The SpaceX-driven overhang on telecommunications stocks could last well into next year, according to one analyst.

The specter of SpaceX is hanging over AT&T, Verizon and other telecommunications stocks as investors fear an Elon Musk-led industry shakeup.

Through its Starlink satellite-internet business, SpaceX (SPCX) is primed to disrupt the U.S. wireless market, some analysts say. The sector is well aware of that and has taken some measures to defend itself, but it may not be doing enough.

"We are concerned the industry is underestimating the risk of satellite," Oppenheimer analyst Timothy Horan said in a note to clients last month as he downgraded AT&T (T) to perform.

Telecoms are publicly positioning satellite largely as a complementary service to their existing offerings. T-Mobile (TMUS), which has an exclusive U.S. deal with SpaceX, has said that just 0.0002% of its total network usage in May was tied to satellite coverage. Its exclusivity deal expires this month.

AT&T Chief Financial Officer Pascal Desroches said at a conference last month that satellite is a "great solution" for the few rural areas in the U.S. that are not covered by other options. Satellite is a complementary service for 95% of Verizon Communications (VZ) customers, CEO Daniel Schulman said in May.

But telecom stocks have been falling over the past week as SpaceX appeared to plan for a stronger push.

Right now, SpaceX can provide internet for both personal and commercial use through Starlink terminals that connect with the company's satellites in low-Earth orbit. It also offers internet through partnerships with T-Mobile and others.

But SpaceX is reportedly planning to offer mobile service directly to consumers and discussing a mobile-phone partnership with Charter Communications (CHTR). A Charter deal could open up Starlink's reach to tens of millions of homes and public spaces, according to Wolfe Research.

AT&T's stock is down more than 11% this week, for its worst week since March 20, 2020, according to Dow Jones Market Data. A slight downturn on Thursday is also sending the stock to a new 52-week closing low.

Verizon shares are also down by about 11% this week, making for the worst week since July 22, 2022, when the company reported poor earnings, according to Dow Jones Market Data. T-Mobile is down 4% this week, while SpaceX is up 4%.

SpaceX has a few ways to enter the wireless market, according to TD Cowen analysts, including by spending billions of dollars to develop a facilities-based mobile virtual network operator. It could also reach an MVNO agreement with T-Mobile, AT&T or Verizon, which would allow SpaceX to use one of those companies' networks to offer its services, or it could acquire a wireless carrier, the analysts said.

However, the companies have individually shot down MNVOs with Starlink. They have also proposed a joint venture that would invest in using satellite-based direct-to-device technology to support areas with coverage gaps. Analysts say the deal is a defensive play against SpaceX.

"Any entry of SpaceX could be highly bearish for the wireless industry," TD Cowen's Gregory Williams said in a client note. "As such, we are hopeful but not convinced that no carrier will budge and cave on an MVNO agreement."

BNP Paribas analyst Sam McHugh said in a note on Wednesday that the SpaceX-driven overhang on wireless stocks "may well persist" until next year, when the U.S. auctions off upper C-Band spectrum. Williams expects between $30 billion and $75 billion to be spent on that bidding war, which he called "much more consequential" than a recent bidding auction.

Otherwise, the overhang could be lifted if SpaceX signs a direct-to-consumer deal with Verizon or AT&T, which McHugh said could signal a "détente" in tensions. Or SpaceX and T-Mobile could renew their deal, McHugh said, although that may not be as simple as it seems.

SpaceX isn't the only player telecoms have to worry about. On Thursday, Amazon (AMZN) said it had launched enough satellites to begin offering initial service in 2026. AST SpaceMobile (ASTS) is also working to offer its own services.

-William Gavin

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