Elon Musk Just Declared War on Your Phone Company

Transcript

Elon Musk says SpaceX is buying the last piece of the spectrum puzzle to cover America. Your phone company noticed. By lunch next day, America’s three biggest phone companies had lost over 50 billion dollars in market value. This is how Elon Musk declared war on your phone company. But if airwaves are not a network, why the panic? Why does he want Tesla and SpaceX as one company? And where will his network live: 80,000 cell sites, or rooftops?

It is Thursday the eighth of October, and the New York stock market has just closed for the day. SpaceX, the rocket company run by Elon Musk, puts out a short statement. It is buying a nationwide block of airwaves from an investment firm called Grain Management. Low airwaves, in the 800 megahertz band, the kind that travel far and reach inside buildings. Neither side says what it paid.

The Wall Street Journal puts the deal at about 8 billion dollars. And SpaceX says exactly what the airwaves are for. Once regulators sign off, its new Starlink Mobile service will join satellites in space with equipment on the ground, to connect phones everywhere. SpaceX also points to a fresh approval from Washington. America’s telecom regulator, the Federal Communications Commission, has approved 15,000 new satellites for it. Musk goes further online. For those who understand the spectrum wars, he writes, this is an earthquake.

The ground starts shaking before Friday even begins. In after-hours trading, Verizon, AT&T and T-Mobile each slide about seven percent. Then the real session opens, and it gets worse. Verizon closes on its worst day since 2002. AT&T has its worst day in a quarter of a century. T-Mobile falls harder than both. Even Charter and Comcast, which sell phone plans running on Verizon’s network, are dragged down with them.

In Washington, the man whose agency must approve the deal sounds relaxed. Brendan Carr, the chairman of the Federal Communications Commission, tells CNBC all this competition is really good news for the American consumer. It is not for us, he says, to pick winners and losers. On Wall Street, analysts at Evercore ISI write that the rocket maker now has the outline of a real network. And the most awkward detail of the deal has not even sunk in yet.

SpaceX’s plan, in its own words, is to become a major mobile carrier in the United States. A rocket company now wants the customers of AT&T, Verizon and T-Mobile. Grain had only held these airwaves for a couple of months. Until August, the airwaves SpaceX had just agreed to buy belonged to T-Mobile.

Back in June, Gwynne Shotwell, the president of SpaceX, stood on a walkway above the Starship factory in Starbase, Texas, in the United States. For years she had doubted the company would ever sell its shares to the public. Now, she told CNBC, it felt like the right time. Soon after, SpaceX raised 85.7 billion dollars in a record stock market debut. Its plan for the listing valued the rocket maker at nearly 1.77 trillion dollars, more than Musk’s other public company, Tesla.

So where does a rocket company’s money actually come from? Mostly not from rockets. Starlink, its satellite internet service, now has 13.6 million subscribers, and almost all of SpaceX’s profit still comes from it. In the last quarter, the launch business barely grew, while internet revenue jumped 69 percent from a year earlier. Rockets made the name, but subscriptions pay the bills.

And some of those satellites already talk straight to ordinary phones. Around 650 of them beam a signal to handsets through partnerships with phone carriers, including T-Mobile. Lately, T-Mobile has quietly dropped SpaceX’s name from parts of its website. SpaceX, meanwhile, has been buying airwaves of its own from the satellite firm EchoStar. That purchase gives it about thirteen times the spectrum it borrows from the carriers today. Shotwell says the next satellites, using the EchoStar airwaves, could be a hundred times better than what customers get now.

Then came the third quarter results, and another call with investors. Revenue reached 14.58 billion dollars, about 160 million dollars for every day of the quarter. Its biggest business is no longer rockets or internet, but artificial intelligence, after it bought Musk’s AI lab, xAI, earlier this year. And for the first time since listing, SpaceX made a profit. Money, in other words, is not the problem.

Back on its first earnings call as a public company, SpaceX had already spelled out what the industry had been whispering about for months. It would build a phone network on the ground as well. Shotwell put the prize at roughly 600 billion dollars a year, the money America’s big three collect from their customers. That is more than 1.6 billion dollars every single day. But satellites and airwaves alone, analysts warn, cannot carry a busy city’s phone traffic. Shotwell expects to take quite a few of their customers, with phones that never hit a dead zone.

The carriers did not stay quiet for long. John Saw, the president of technology at T-Mobile, answered on LinkedIn. He said he had tremendous respect for what SpaceX had done in space. Then he drew the line. You can acquire spectrum in a single transaction, he wrote, but you cannot acquire a nationwide, high-performing wireless network overnight. Building one, he said, takes years of engineering.

At AT&T, the chief executive John Stankey went further on his company’s earnings call. Analysts wanted to talk about SpaceX, and he told them not to over-rotate on what he called one carrier of low-band spectrum. In a big city, he explained, AT&T runs six to eight of those carriers at once. On every antenna site, in hospitals, high-rise buildings and stadiums. Matching that, he said, takes many years and a huge investment. Yet AT&T’s own shares still sank after that call.

Wall Street mostly took the carriers’ side. JPMorgan saw limited near-term risk, given the time and money a real ground network demands. UBS warned that the new airwaves might not even reach inside some buildings. And the research firm Bernstein put the price of a competitive nationwide network somewhere between 50 and 130 billion dollars. So if the threat is years away, why did the market panic?

Vish Nandlall, an analyst who follows Starlink closely, called the after-hours slide a crazy reaction to a relatively small amount of radio spectrum. But then he did the arithmetic. SpaceX, he argued, does not need to win many customers to hurt the big three. If it simply pushes prices down, every dollar cut from a monthly bill, across 100 million subscribers, wipes out 1.2 billion dollars of yearly revenue. The danger is not that SpaceX wins. It is that it could push everyone’s prices down.

By then, the three rivals had already joined forces. AT&T, Verizon and T-Mobile had signed a joint venture to pool spectrum for satellite coverage and wipe out dead zones. SpaceX and Starlink were not mentioned at all. Verizon’s own verdict on Musk’s airwaves was blunt. If they do not have the network to use it, it’s just empty airwaves.

Tuesday the twentieth of October, SpaceX’s earnings call. On the call, Elon Musk turns to his other public company, Tesla. And Musk confirms that Tesla and SpaceX are exploring a merger. The boards of Tesla and SpaceX have each set up a special committee of independent directors to study a merger. Musk calls it a good idea. Then, in the same breath, he hedges.

The committees, he says, have not agreed on the terms of any deal, and obviously there is no guarantee they will. According to Euronews, he admitted he felt like he was tap dancing through a minefield. And he pointed out a big obstacle himself. Any deal would need the backing of more than half of all Tesla shares. Quite a high hurdle, Musk called it.

The next day, Tesla’s own numbers showed why the idea might appeal. Its profit fell 43 percent, to 787 million dollars, on flat sales. Car deliveries slipped. And on Tesla’s own call, Musk declined to discuss the possible merger any further. In one company, Euronews notes, SpaceX’s surging sales could help cover Tesla’s weaker numbers.

So what would one company give him? Euronews lays out the case. Musk argues that artificial intelligence will decide where both companies go next, and they are already building a chip factory together in Texas. Under one roof, he could move engineers and money between them without the disclosures and lawsuits that come with deals between related companies. Then there is control. Musk owns about 48 percent of SpaceX and holds more than 80 percent of its votes, but only about a fifth of Tesla. And his Tesla pay package treats many of its goals as met if certain kinds of merger go through.

It would not be his first time. Tesla bought SolarCity, a solar installer run by his cousins, in a deal a Delaware court only upheld after years of lawsuits. His AI start-up xAI swallowed X, and then SpaceX swallowed xAI. Together, Tesla and SpaceX are worth about 3.5 trillion dollars, potentially the biggest merger ever.

And Bloomberg, citing people familiar with the matter, reported the aim: announce a deal by the middle of next year, and finish it before Donald Trump leaves office in January 2029. Under Trump, Euronews notes, the deal could get a friendlier reception. But while Wall Street argued about one giant company, where would Musk’s phone network actually be built?

Thursday the twenty-second of October, and once again the news lands after the closing bell. Bloomberg News reports that SpaceX is in talks to secure access to cell sites all over the United States. Not a handful. Enough to equal half of all the purpose-built cell towers in America. The sources are unnamed, and the talks are only talks.

One company is named: Crown Castle, which runs about 40,000 towers across the country. Only the day before, asked about leases with SpaceX and Amazon, its chief executive, Christian Hillabrant, had said Crown Castle was talking to all parties. He would not name a single customer. That evening, AT&T, Verizon and T-Mobile slid again in after-hours trading. The tower owners’ shares, by contrast, had gone up when the airwaves deal broke.

But there was something odd about this story. And on that first call as a public company, SpaceX had described a very different network. Gwynne Shotwell spoke about little cell stations, built into the same box as a customer’s Starlink dish. Musk was blunter. Instead of huge base stations that are expensive and hard to place, he wants a large number of small ones. Starlink dishes on the roofs of homes and businesses, sending phone signal down to the street. That way, Shotwell said, SpaceX would not have to spend many billions of dollars up front.

So which is it, towers or rooftops? The trade site Wireless Estimator read SpaceX’s words plainly: a plan to build around the towers, not on them. The boss of SBA Communications, Brendan Cavanagh, was more hopeful, saying satellite operators will eventually need real equipment on the ground. David Barden, an analyst at New Street Research, was less convinced, writing that he was highly skeptical this was even a real thing. And at the time, Crown Castle said it had seen no change in radio building tied to satellite rivals.

For the big three, the rooftop version still goes after the same phone bills. A network on rooftops would largely bypass the tower owners. SpaceX’s own words describe a phone network living on its customers’ rooftops.

For all the noise, almost none of this is finished. The Grain airwaves still need the Federal Communications Commission to approve the sale. And the bigger EchoStar airwaves are only expected to pass fully to SpaceX around the thirtieth of November 2027. Until then, the regulator has attached conditions to how SpaceX can use them. Every step still runs through Washington.

The new phone satellites start flying next year, Shotwell says, with service planned by the end of next year. Until that happens, a phone that talks to space is mostly a backup for dead zones and emergencies. That is exactly how the big three describe it. And analysts note that SpaceX still holds far less phone spectrum than any of them. So the carriers have time. The question is how much of it Musk will give them.

Any merger is even further away. Tesla’s shareholders meet on the third of December, and there is still no deal to vote on. The committees have not agreed on terms. Any deal would still have to clear that high hurdle of Tesla’s shares. And it would have to survive the regulators and the shareholders who will study every line of it.

Then there is the clock in Washington. Next month, America votes in its midterm elections. Musk has become the biggest known donor backing Republicans in these midterms, giving more than 276 million dollars since July, according to his super PAC. A Democratic win, Euronews notes, could bring tougher scrutiny of SpaceX’s government contracts and Tesla’s self-driving software. The richest man in the world is now spending on the vote as well as the network.

SpaceX itself saw that risk coming. In its own listing documents, it warned investors what a shift of power in Congress could mean. A material and adverse impact on our growth and competitive position.

So who will own America’s next phone network? SpaceX says satellites and rooftops can do the job that towers do today. The carriers say airwaves are not a network, and that building one takes years. Both can be right for a while. But as Vish Nandlall argued, SpaceX could change what your phone bill costs without winning the war.

And if the merger goes ahead, Musk’s rockets, satellites, artificial intelligence and cars would all sit under one roof. One company, one boss, and one very large ambition, pointed straight at the companies that carry America’s calls. Watch the regulators, the December meeting, and the midterm vote next month.