SpaceX's phone plans sank the wireless carriers and lifted the tower owners

One announcement split the US telecom sector in two on Friday. The three national wireless carriers suffered some of their worst sessions in years, while the companies that own the towers their antennas hang on posted some of their best. Both moves traced back to the same news: SpaceX's plan to turn its Starlink Mobile service into a full competitor in American cellphone service.

The carriers' rout

By the close, T-Mobile US had fallen 13.27% to $148.58, AT&T had dropped 10.82% to $22.18 and Verizon Communications had lost 10.14% to $41.65. Earlier in the session, Reuters reported that T-Mobile had hit its lowest level in more than 33 months and that the three carriers were the biggest percentage decliners in the S&P 500. CNBC reported during the day that Verizon was on pace for its worst session since 2002, when the stock was down about 7%; it finished with a deeper loss than that.

The trigger was SpaceX's agreement, announced Thursday evening, to buy private-equity firm Grain Management's nationwide 800 MHz spectrum portfolio. SpaceX did not disclose a price, but Reuters cited reports valuing the deal at about $8 billion. It remains subject to regulatory approval.

In its announcement, SpaceX said it intends to "become a major mobile carrier in the U.S." It said the new airwaves "will provide a coverage layer that ensures Starlink Mobile's signal penetrates through obstacles, such as walls, and can provide service to customers' devices even when they are in buildings." Indoor coverage has long been one of the main advantages traditional networks hold over satellite service.

"The implications for AT&T, T-Mobile, and Verizon are somewhat negative: their defenses against low-band spectrum claims are weakening," Kutgun Maral, an analyst at Evercore ISI, told Reuters. European telecom stocks also fell, according to Reuters.

Why the tower owners rallied

The companies that lease space on cell towers moved the other way. Crown Castle rose 15.6% to $79.64, American Tower climbed 9.3% to $182.24 and SBA Communications gained 7.34% to $182.49.

The reasoning is that low-band spectrum such as 800 MHz is typically deployed from the ground. CNBC noted that robust terrestrial coverage, particularly in dense urban areas and inside buildings, still requires cell towers. If SpaceX builds out a ground network, it could become a new tenant.

"It chips away at the 'towers are obsolete in a [direct to device] world' narrative, with which we have long vehemently disagreed," Bernstein analyst Madison Rezaei wrote in a Thursday note quoted by CNBC. "And it lends credibility to a potential new buyer of tower capacity, whether the eventual build is large scale or more selective."

Friday's gains came from a low base. Tower stocks, many of them structured as real estate investment trusts, have been weighed down by higher interest rates and by the prospect of satellite connectivity. Over the past five years American Tower is down more than 30%, SBA Communications about 45% and Crown Castle about 55%, according to CNBC.

Not everyone is convinced

Some analysts cautioned against reading the announcement too literally. "SPCX may be bluffing to keep wireless down and get an [mobile virtual network operator agreement], but needs to be taken seriously," TD analyst Gregory Williams wrote on Thursday, according to CNBC. An MVNO agreement would let SpaceX rent capacity on an existing carrier's network rather than building its own.

Williams pointed to the wording of SpaceX's release, including phrases such as "an advanced terrestrial deployment" and "to become a major mobile carrier," as the more important signal than the spectrum itself.

Regulators appear open to the idea. FCC Chair Brendan Carr told CNBC that competition in the spectrum market was "really good news for the American consumers." SpaceX shares rose about 1% to 2% during the day, according to CNBC and Reuters.

What to watch

The deal still needs approval, and SpaceX has not said how quickly it would build a ground network or what it would charge. For the carriers, Friday's selloff reflected a question investors had mostly set aside: whether a well-funded newcomer can win customers in a market that has had three national players for years.

For tower owners, the question is whether a new tenant actually materialises at scale. Both groups will be watched closely when they report third-quarter results in the coming weeks, when management teams are likely to be asked directly about SpaceX.