SpaceX's surprising $17 billion bid for EchoStar's spectrum earlier today, which sent the latter's shares up by 17% during trading today, is part of a bid to take on Apple, believes TMF Associates. The deal will unlock 50MHz of additional S-band spectrum in the US and Mobile Satellite Service (MSS) spectrum worldwide for SpaceX's Starlink internet service. The deal aims to incentivize Apple to work with Starlink instead of focusing on its partnership with GlobalStar through which the consumer electronics firm aims to build its own satellite internet constellation, according to the research and consulting firm.
SpaceX's Spectrum Buy Leaves Carrier Stocks In The Red
SpaceX's $17 billion deal effectively makes the firm the dominant player in the direct-to-cellular or the direct-to-device (D2D) market, as not only does it operate the world's largest satellite internet constellation, but also the world's most frequently launched rocket family.
As a result, after the announcement, shares of T-Mobile, Verizon and AT&T are trading 2.4%, 2.4% and 3.7% lower as investors worry about their ability to compete in the lucrative market. T-Mobile is hit particularly hard since the firm might find that SpaceX does not need its spectrum in the future to provide direct-to-cell satellites if it is able to convince smartphone companies to support the Starlink satellite internet service.
The need to have device manufacturer support for Starlink is also on the mind of the research and consulting firm TMF Associates. In a post after SpaceX announced the deal, the firm opines that SpaceX will be eager to have Apple's iPhone support the Starlink internet network.
While Apple is aiming to build its own satellite constellation through a partnership with GlobalStar, its plans are unclear, as not only did the firm bring Starlink to the iPhone 13 earlier this year but it also suffered from a GlobalStar launch postponement. TMF believes that the two are interlinked, with SpaceX agreeing to book a future launch slot for GlobalStar on the condition that Apple provide Starlink support on the iPhone 13.
However, while SpaceX might have caught Apple on the back foot, the firm's $17 billion spectrum deal does depend quite a bit on Apple cooperating with it through device support. The "support from device manufacturers will be needed to get the new capabilities enabled by this spectrum into consumers’ hands in the near term," says TMF.
It adds that in case Apple is less than forthcoming, SpaceX might announce a "Starlink phone" and set it apart by becoming the first to offer direct-to-satellite connectivity.
The $17 billion price tag SpaceX has paid for EchoStar's spectrum, half of which is funded by SpaceX's stock, is more than the development expenditure of the Starship program. SpaceX has bet on the ability to launch its next-generation Starlink satellites on Starship, and its ability to hold the spectrum should depend on Starship's Starlink launch cadence.
In its blog post announcing the deal, SpaceX outlined that the second-generation Starlink direct-to-cell satellites will offer 100x more capacity than the current generation constellation.
"Starlink Direct to Cell’s next generation service will deliver unparalleled performance to standard, unmodified cell phones and IoT devices – helping to close coverage gaps and ultimately eliminate mobile dead zones around the world," wrote the firm.
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