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Imagine looking down at your smartphone five years from now and realizing something is missing.
Your wireless carrier.
No Verizon (VZ). No AT&T (T). Maybe not even T-Mobile (TMUS). Instead, your phone connects directly to satellites orbiting hundreds of miles above Earth. No cell tower nearby? No problem. You could potentially make calls, send messages, and access the internet from places where wireless coverage doesn’t exist today.
Sound far-fetched? Well, Elon Musk just spent billions of dollars betting that this future is closer than most people realize.
Last Thursday, SpaceX (SPCX) announced an approximately $8 billion deal to acquire wireless spectrum from Grain Management. Spectrum is essentially the invisible highway that carries wireless signals between devices. And Wall Street immediately took notice. Verizon, AT&T, and T-Mobile all fell over 10% last Thursday after the announcement.
But here’s what I find particularly interesting. The biggest investment opportunity might not be betting against Verizon or AT&T. It could be investing in the companies helping build an entirely new communications network.
For decades, the wireless industry has operated on a relatively straightforward model. Telecom companies would spend billions building cell towers, installing equipment, and purchasing spectrum licenses. Customers then pay monthly subscriptions to access those networks.
It’s an incredibly profitable business model when executed well. But it has one major limitation: cell towers can only cover so much territory.
SpaceX wants to change that.
SpaceX’s Starlink satellite network already provides internet service to millions of customers around the world. But historically, those customers needed specialized equipment, including a satellite dish. Now SpaceX is pushing toward something much more ambitious: connecting ordinary smartphones directly to satellites.
“Jellyfish” from SpaceX launch captured yesterday. Image courtesy of Karim Rahemtulla.
And that’s where its latest spectrum acquisition becomes so important. Spectrum is one of the most valuable assets in the telecommunications industry because wireless networks need access to specific frequencies to transmit data. By acquiring additional spectrum, SpaceX is strengthening its ability to build a satellite-based mobile network capable of delivering more than emergency text messages.
Eventually, the goal is to provide increasingly capable mobile broadband services directly to smartphones. Instead of relying entirely on nearby cell towers, your phone could potentially connect to a satellite whenever traditional coverage isn’t available.
For people living in remote areas, traveling across oceans, or working in isolated locations, that could be transformative.
Before investors rush to sell every traditional telecommunications stock, there’s something important to understand. Satellites aren’t about to make cell towers obsolete. At least not anytime soon.
Terrestrial wireless networks can deliver enormous amounts of data across densely populated areas. A satellite hundreds of miles above Earth faces different technical limitations, particularly when thousands of customers are trying to connect simultaneously.
So rather than immediately replacing wireless carriers, satellite connectivity could initially make their existing services more valuable. But that doesn’t mean the long-term competitive threat should be ignored.
Remember what happened when smartphones first appeared. The original iPhone didn’t immediately destroy the businesses of Nokia, BlackBerry, or traditional cellphone manufacturers. But it fundamentally changed what consumers expected from their phones.
Satellite connectivity could eventually create a similar shift in expectations. Once consumers get used to the idea that their phones should work virtually everywhere, dead zones may become increasingly unacceptable. And that could force the entire industry to evolve.
One of the biggest developments in the space industry this year was SpaceX’s blockbuster June IPO. The company raised approximately $85.7 billion, giving everyday investors direct access to Elon Musk’s rapidly expanding space empire.
And last week’s spectrum acquisition adds an entirely new dimension to the investment story.
SpaceX is no longer just a rocket company or satellite internet provider. It’s positioning itself to compete in the enormous wireless telecommunications industry, potentially opening another major source of revenue in the years ahead.
But SpaceX isn’t the only company investors should be watching.
Consider AST SpaceMobile (ASTS), which is building its own satellite network designed to connect directly with ordinary smartphones. AST already has partnerships with AT&T and Verizon, and those relationships could become even more valuable as traditional carriers look for ways to compete with SpaceX.
Interestingly, Deutsche Bank recently argued that investors may be overestimating the threat SpaceX poses to AST. Both companies are pursuing satellite connectivity, but they’re using different technologies, spectrum arrangements, and business strategies. It’s entirely possible that more than one company will emerge as a major player in this market.
Then there’s Gilat Satellite Networks (GILT), which provides the equipment and technology that connect satellites with communications networks on the ground.
This is the picks-and-shovels side of the opportunity that I particularly like. Whether SpaceX, AST, or another company captures the largest share of the market, the industry will need more antennas, networking equipment, and ground infrastructure as satellite communications expand.
I’ve spent nearly 25 years investing in technological revolutions, and one thing I’ve learned is that some of the biggest opportunities emerge when two established industries begin to converge.
We’re watching that happen right now with satellites and wireless communications. For decades, satellite phones were expensive devices used primarily by explorers, military personnel, and people working in remote locations. Now we’re moving toward a world where satellite connectivity could become a standard feature of the smartphone already sitting in your pocket.
Will SpaceX eventually replace Verizon, AT&T, or T-Mobile? I doubt it will be that simple. But I believe the boundaries between traditional wireless networks and satellite communications are beginning to disappear, creating opportunities for both established companies and emerging innovators.
The next great communications revolution might not require a new phone. It might just require looking up.
P.S. Notice when SpaceX dropped this news… late Thursday, after the market closed. By Friday’s opening bell, AT&T, Verizon, and T-Mobile were already deep in the red. By Friday’s close, AT&T and Verizon had logged their worst days in over 20 years.
That’s how fast markets move now. One headline after hours, and billions in market value can vanish before most investors finish their morning coffee.
My colleague Bryan Bottarelli has built his strategy around exactly that window. He sees six crucial forces converging to set up 90 days of peak volatility, and he’s targeting the next potential 81%, 128%, even 240% overnight winners.
He’s laying out the whole plan tomorrow, Thursday, October 15, at 2 p.m. ET. It’s free to attend. Click here to save your seat.
