The Fourth Wireless Competitor Emerges  

Greetings from Cedar Rapids, Kansas City, and Boston, where we participated in Fort Point Capital’s Annual meeting.  Pictured is the Trinity Church in Boston, a structure rich in history and national significance (more on why here).

Prior to Friday, we had planned a more traditional structured Brief focused on key metrics like churn, revenue per account, and capital efficiency.  Then came the announcement that Elon Musk and SpaceX were purchasing nationwide 800 MHz spectrum from Grain Management (which originally supported 20+ million Nextel customers). Responding to a trillion dollar market cap potential competitor now takes center stage.  While there are headwinds, we will spend the remainder of this Brief documenting why we think Elon is serious and why investors should carefully consider their investment assumptions. 

Here is the current earnings schedule for the Telco Top Five and the Fab Five (Meta and Amazon should announce their earnings call dates this coming week): 

The Fortnight That Was (The Fourth Wireless Competitor Emerges)

This was not a quiet week for the ten stocks we track.  On Thursday after the market close, Grain Management announced that the spectrum they recently acquired from T-Mobile for $2.9 billion and some 600 MHz spectrum would be sold to SpaceX.  The Wall Street Journal reported that Grain sold that block of spectrum less than 60 days after purchasing it for $8 billion (176% return in less than 60 days). 

For those of you who have followed the wireless industry for the past two decades, the punchline is easy to follow:  Elon Musk will do what Charlie Ergen couldn’t accomplish – compete with the Big Three (Verizon, T-Mobile, AT&T) using a facilities-based nationwide network. 

Through various auctions and transactions, Dish (now a part of Echostar) assembled a patchwork of low- and mid-band spectrum (holdings from their 2023 annual report): 

• 600 MHz.  Roughly 20 MHz nationwide coverage.  This and the 3.45 GHz spectrum holdings described below were purchased by AT&T in 2025. Echostar also obtained favorable MVNO terms and conditions from AT&T in the $23 billion transaction; 
• 700 MHz.  Limited holdings, almost of them low-band (downlink) capabilities.  As of October 10, Echostar still holds this spectrum;
• AWS-4. Roughly 40 MHz nationwide of this mid-band spectrum band, and;
• AWS-3.  Selected coverage of varying depth.  This spectrum pairs well with AWS-4.  Echostar sold this spectrum to SpaceX in two separate transactions (September and December 2025).  The first was sold for $17.6 billion while the AWS-3 spectrum went for $2.6 billion.  Half of the $17.6 billion was in SpaceX stock which now has a value of ~ $53 billion.  Total current value of the proceeds to Echostar = $64-65 billion. Echostar’s H-Block holdings were also included in this transaction;
• 3.45 GHz.  35 MHz covering roughly 80% of the population.  Purchased by AT&T along with the 600 MHz spectrum holdings for $23 billion;
• CBRS (3.50 GHz). Nationwide Priority Access Licenses (PALs). As of October 10, Echostar still holds this spectrum. 

Dish (when they were a separate company from Echostar) was also slated to purchase T-Mobile’s nationwide 800 MHz spectrum holdings (formerly powering Nextel’s push-to-talk network but later integrated into Sprint) for $3.6 billion. They could not complete this transaction for financial reasons and T-Mobile auctioned the spectrum (14 MHz paired 800 MHz) off to Grain Management who flipped it to SpaceX last week.   

For those of you who would like to see each spectrum holding in map form, Spectrum Omega (now Forward Path) has maps of each band by owner here. 

Telecom stocks went into freefall on the news, with T-Mobile down 13.6%, AT&T down 9.8%, and Verizon down 8.8% on Friday.  Verizon’s dividend yield is now 6.8%, and AT&T’s now at 5.0%.  The question every telecom provider will be asked in 3Q earnings (which should be good for each of the carriers) will be “How will you prevent SpaceX from acquiring some or most of your residential and small business wireless customer base?”

Verizon and AT&T have a clear answer: converged pricing and services. Each will offer residential services that will combine home broadband and wireless (including family plans) for very attractive rates.  They will develop an SSID scheme already used in cable which will allow Verizon and AT&T customers to access Wi-Fi over other AT&T and Verizon hotspots, offloading wireless traffic onto the broadband network.  And they will continue to increase broadband speeds out of the home with very low latency.  We think that AT&T has the stronger argument of the two carriers if they can complete their 60 million homes passed target quickly (within 36 months).

T-Mobile’s answer is slightly different: While Magenta has been successfully acquiring family plans from AT&T and Verizon over the last several years, the carrier has disproportionately more wireless “cord cutter” customers.  These customers rely on their handsets (and T-Mobile Home Internet) to provide wireless access.  They are more price conscious (re: Starlink retails for $55-130/ mo. while T-Mobile Home Internet currently retails for $50-70/ month.  Both of these plans exclude any bundled discounts – T-Mobile’s $50 rate drops to $35/ month when bundled with a line.  We would not be surprised to see T-Mobile increase T-Mobile Home availability and introduce new hardware which will increase speeds to 500 Mbps consistently. 

Per the SpaceX prospectus (here), each satellite will need to be replaced every five years. This creates less perpetuity value for their product but also increases the probability that every half decade we will see a speed boost (and latency reduction). 

Each carrier (including SpaceX) will benefit from the 5G Advanced and 6G spectral efficiency changes (more details in this Ericsson whitepaper).  This will open up the “fallow capacity” in the network by 2030, providing a several year extension of fixed wireless access gains. 

After each wireless carrier (and cable) have provided their responses, how will industry value shift?

1. Customer durability will become an important metric. This relates to a previous marketing term “Most Want to Investigate.” For home broadband, if a residential customer can receive an everyday low price of $50/ month for 1 Gbps of symmetric speeds with minimal downtime (or with an optional satellite-based backup), it’s unlikely that they will seek to replace that service with satellite.  Those customers have likely had AT&T Fiber, T-Fiber, or Verizon Fios for some time and are looking to save money through cross-product discounts. 
2. Discounts will evolve to include select “work from home” packages. Employee pricing discounts have been popular with wireless companies for decades.  Shown nearby (and here) is the AT&T wireless discount program for Cargill employees (20% off the premium unlimited plan).  This will be enhanced to include a residential fiber package that increases speeds during the day for work from home data needs.  We think that Starlink will be hard pressed to compete with AT&T or Verizon as they expand these plans.  We also fully expect Comcast Business to flex some pricing muscle as well if their corporate accounts are threatened.
3. Geographic coverage of converged products and services will also become more important.  Starlink could drive an additional 50-60K tower colocations if their ambition is to have a nationwide parity product.  This benefits the tower companies most and was the primary reason Crown Castle (+15.6%) and American Tower (+9.3%) popped on Friday. 
4. Bundled (fiber/wireless) product innovation will take center stage.  We aren’t exactly sure what form this will take, but assume it will require a) consistent low latency and b) higher bandwidth.  Gaming, entertainment, and sports all have reasons to quickly adopt these new standards, and broadband through satellite will struggle to remain at parity. The winners here will be Samsung and Apple. 

Even with these headwinds, we think that Starlink will be attractive to at least 40% of the homes in the US (and more if/as they offer a backup service for home broadband for a reduced or annual tonnage rate).  We also think that the spectrum purchases have value when embedded in every Tesla (augmenting Starlink coverage).  AT&T has done a poor job of monetizing their in-car offerings – Tesla will not repeat that mistake. 

Here are three questions we would ask every carrier after Friday’s announcement: 

1. Is SpaceX a long-term partner for your company? (T-Mobile = yes; AT&T and Verizon = no)
2. What does the entry of SpaceX mean to the cost of spectrum in the next auction?
3. If one of your competitors were to be acquired by SpaceX, would you consider being acquired by Amazon, Google, Meta, or Microsoft?

Bottom line: We have read many reports that suggest this spectrum action is strategic posturing, a way to get one or more of the carriers to cooperate SpaceX. We disagree and think Elon Musk is dead serious about building a wireless network. As a result, SpaceX will reinvent wireless network capacity planning while designing and building hardware alternatives to Samsung and Apple. We also think that acquisition is a last (and distant) resort.  

That’s it for this week.  In two weeks, we will have AT&T and Comcast earnings to discuss (spoiler alert: each of the Big 3 will beat quarterly expectations and give a rosy picture for 2027). In the meantime, if you have friends who are interested in being notified each time we publish a Brief, please have them sign up at www.sundaybrief.com. 

Go Chiefs and Sporting KC!

Important disclosure: The opinions expressed in The Sunday Brief are those of Jim Patterson and Patterson Advisory Group, LLC, and do not reflect those of CellSite Solutions, LLC, or Fort Point Capital.