Why SpaceX's Wireless Expansion Could Be a Windfall for Tower Stocks

America's wireless market has been dominated by AT&T, Verizon, and T-Mobile for years, leaving smaller competitors to rent access to their networks. Elon Musk wants to change that, and his plans could create an unexpected opportunity for investors.

SpaceX is reportedly in talks to access at least 80K cell sites across the country, potentially laying the groundwork for a fourth national wireless carrier.

SpaceX has an ambitious plan

The scale alone makes this worth watching. SpaceX's target is equivalent to roughly half of the 158.5K purpose-built cell towers operating in the US. American Tower has approximately 41K sites across the US and Canada, while Crown Castle operates around 40K.

Rather than building everything itself, SpaceX would lease existing infrastructure. That's still an expensive undertaking, with TD Cowen estimating that a nationwide wireless network could cost more than $80B and take years to complete.

The company has already taken a step toward that goal through its agreement to acquire low-band spectrum from Grain Management. The airwaves can travel long distances and penetrate buildings, making them valuable for wireless coverage. The nearly $8B deal is still awaiting regulatory approval.

Why tower owners could benefit

For companies that own cell towers, another wireless carrier means another potential customer. Crown CastleCCI, American TowerAMT, and SBA CommunicationsSBAC rent space on their infrastructure to telecom operators, collecting recurring revenue without having to run wireless networks themselves.

The existing carriers account for much of that business. AT&T, Verizon, and T-Mobile generate roughly 85% of American Tower's revenue in the US and Canada, so bringing in a fourth national operator could help diversify its customer base.

Citi sees SpaceX's reported plans as a net positive for all three tower companies. Crown Castle CEO Chris Hillabrant didn't confirm whether SpaceX was among its prospective customers during this week's earnings call, although he left little doubt that discussions are happening across the industry.

Crown Castle also offers a 5.4% dividend yield, although that makes its shares sensitive to changes in interest rates. And investors shouldn't count on a SpaceX deal just yet.

Nothing has been signed, and some analysts believe the talks could give SpaceX more negotiating power with existing carriers. Improvements in satellite technology could also reduce the number of ground sites it ultimately needs.

The carriers face different risks

The potential disruption won't affect every telecom company equally. Cable providers could face competition in both home broadband and mobile services, while established wireless carriers already have extensive networks, spectrum holdings, and millions of customers.

Even so, Citi estimates that the three major carriers face potential valuation downside of 29% to 32% if the competitive threat develops.

T-MobileTMUS appears better positioned than its rivals. It already partners with SpaceX on satellite-to-cell service and controls roughly 400 megahertz of spectrum, compared with SpaceX's 80 megahertz.

Its growth outlook also stands out. Citi analyst Michael Rollins expects T-Mobile's earnings to increase around 24% annually over the next two years, roughly 11 percentage points faster than AT&T and 18 points ahead of Verizon.

Despite that advantage, T-Mobile trades at approximately 12.5x forward earnings, its lowest valuation in more than a decade.

AT&TT has its own supporters after reporting better-than-expected third-quarter results. Rollins sees the performance as encouraging for 2027, while JPMorgan analyst Sebastiano Petti considers it a top pick. VerizonVZ, meanwhile, has the weakest projected earnings growth of the three.

What SpaceX still needs to prove

SpaceX has the satellites, but providing reliable wireless service in crowded cities is another challenge. Satellites can cover enormous areas, yet their capacity is limited when thousands of people need connections in the same place. Ground infrastructure would help fill those gaps.

The company already has regulatory authorization for up to 15K Starlink Mobile satellites and plans to combine its orbital network with antennas on towers and rooftops. Starlink ended Q3 with 13.6M subscribers and $3.5B in EBITDA, up 35% year over year.

The established carriers aren't particularly worried yet. T-Mobile technology chief John Saw has argued that SpaceX's spectrum holdings won't come close to matching the capacity of existing networks. Verizon executive Katie Magnotta has similarly questioned the value of spectrum without the infrastructure to use it.

Still, Bernstein analysts expect SpaceX's expansion to influence telecom stock valuations well before it has a meaningful impact on earnings. Each new spectrum acquisition or infrastructure agreement could make the competitive threat harder for investors to dismiss.

American Tower reports earnings Tuesday, giving investors an early opportunity to hear whether SpaceX is emerging as a prospective customer.

For the tower companies, the opportunity is that they could earn rental income from a new carrier without having to bet on whether Musk can actually beat the established players. That's what makes them an interesting way to watch this shift unfold.