US, European telecom stocks slide as SpaceX spectrum deal rattles sector

Oct 9 : US and European telecom stocks tumbled on Friday after SpaceX's acquisition of low-band spectrum heightened concerns over growing competition from satellite-based mobile services.

T-Mobile US, Verizon and AT&T fell between 5.5 per cent and 7.4 per cent in premarket trading, while the STOXX Europe 600 Telecommunications index dropped over 2 per cent to its lowest level since January 30.

Deutsche Telekom, Europe's largest telecom operator by market value, fell 6.5 per cent, while Britain's Vodafone dropped 4.1 per cent, France's Orange lost 2.3 per cent and Spain's Telefonica slipped 3.9 per cent.

The slide came after reports that SpaceX had agreed to acquire private-equity firm Grain Management's nationwide 800 MHz spectrum portfolio in a deal valued at about $8 billion, bolstering the company's ambitions in satellite-to-cellular connectivity.

"We believe the Grain transaction is a clear sign that SpaceX is going to be a more aggressive acquirer of spectrum," Morgan Stanley analysts said in a note, adding that any threat to established carriers is likely to materialize gradually, starting in rural markets.

Low-band spectrum can travel longer distances and penetrate buildings and other obstacles more effectively than higher-frequency airwaves, enabling SpaceX's Starlink Mobile push.

SpaceX shares rose 4 per cent after announcing the acquisition, which remains subject to regulatory approval.

Telecom tower operators bucked the sector-wide selloff, as investors bet SpaceX's wireless ambitions could ultimately drive demand for additional terrestrial infrastructure.

American Tower, Crown Castle and SBA Communications advanced between 6.7 per cent and 8.3 per cent.

Morgan Stanley said the transaction was "incrementally constructive" for tower operators, noting that even a satellite-centric network could require deployments of towers, rooftops and small cells, while broader urban competition would require substantially more terrestrial infrastructure and spectrum.

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