SPCX Low-Band Spectrum License Expands Mobile Opportunities; VZ, T & TMUS Plunge

Sam (0:00)

We're back on Morning Trade Live. Let's focus on the chart for SpaceX. Obviously we came off following that IPO, but we've managed to claw back some, and obviously a lot of news around this one this morning. Entering the telco space, we've got a lot of those telcos on the back foot in reaction to some of this news. So let's talk about this. It is the focus of the Morning Trade. Joining us for the details is Marley Kayden. Good morning, Marley. Happy Friday. Just walk us through what we've learned.

Marley Kayden (0:24)

Good morning, Sam. Yes, and you mentioned the IPO price. We are trading above that. We're also trading above where they opened at $150. Right now, we're at $163.53, with a near 2% move to the upside, as SpaceX is now one step closer to becoming potentially a major mobile carrier here in America as it is expanding its Starlink network. They announced an agreement to acquire a nationwide low band spectrum license portfolio of up to 14 megahertz of paired spectrum in the 800 megahertz band. So this addresses one of the key technical gaps that they had to potentially becoming a major mobile carrier here in the US. The company said once we receive final FCC approval, Starlink Mobile will deploy a flexible architecture combining our satellite to mobile constellation in space with an advanced terrestrial deployment that can seamlessly connect devices everywhere. While Starlink Mobile's global 2 gigahertz mid band spectrum will provide high bandwidth capacity in the US, this new low band spectrum will provide a coverage layer that ensures that Starlink Mobile's signal penetrates through obstacles like walls and can provide service to customers' devices even when they are in buildings. Now, critically, most existing mobile devices already support this underused band at 800 megahertz. And Sam, I have to confess, I did not know a lot about low band, mid band and high band spectrum. So I did some research for us to have some, I did some searching to have some context for our viewers. Low band is more addressing rural areas. It covers a very wide swath. It's a highly penetrable band of wireless that can go through buildings and large spaces, whereas mid band and high band exists more in suburban and urban settings, and are more regularly used. But this low band, very important to really be able to cover all areas of the country, which as Elon Musk has made no secret of, he wants to bring connectivity to the entire world, not just people who live in major cities or populous areas. This coming on the heels of the FCC approving Starlink's mobile gen 2 constellation of satellites, where they were given permission to launch 15,000 satellites that are optimized for 2 gigahertz spectrum. So that is in the mid band, more what traditional cell phones use in an urban area.

Additionally, the FCC authorized a full range of black hole bands used by Starlink's V3 broadband satellites. That enables them to operate within the existing Starlink network. So they are really making moves to have this highly connected network that will allow them to potentially become a mobile carrier, which it does appear is the end goal here. But because of that, we are seeing a sharp move to the downside in some of the other major carriers. T-Mobile is down close to 10%.

Verizon down 6%.

AT&T is down close to 7% right now. Comcast is down about 2%.

And we're also getting some commentary from the cell side. JP Morgan already had an overweight rating. They're reiterating that. But they are saying that absent a US mobile virtual network operator agreement, SpaceX will likely need to build a terrestrial network using macro towers to deliver a user experience on par with the traditional wireless carriers. So they say there's still more steps to be done. The acquisition makes Starlink's mobile long-term opportunity more credible though. They use the words more credible and supports the view that SpaceX's mobile ambitions extend beyond handsets. But JP Morgan does say that it sees limited risk in the near term to the wireless incumbents given the time that is going to be needed and the infrastructure and capital that would be required to build a terrestrial network that would compete with the current offerings. Also seeing Barclay initiating coverage today on SpaceX with an overrate rating. They have a $254 price target. This was rolled out in a broader coverage of aerospace and defense overall. As they say, the US is what they call in the early innings of a modern day industrial revolution, but they have a positive view of the sector and they like SpaceX obviously with that overweight rating and they're looking for a little bit more than a quite a significant move to the upside. Actually, we're at 164 for SpaceX. Their price target is at $254, so a $90 move to the upside for SpaceX is what they're expecting over the next 12 months.