SpaceX's agreement to buy Grain Management's 800 MHz spectrum makes a SpaceX terrestrial network more credible and cheaper to build, according to a Bernstein note published Thursday. The analysts see that as a possible catalyst for tower owners whose stocks have been waiting for one.
Bernstein rates American Tower (NYSE: AMT) Outperform with a $214 price target and Crown Castle (NYSE: CCI) Outperform with a $96 target. It rates SBA Communications (NASDAQ: SBAC) Market-Perform with a $219 target. Against Thursday's closing prices, the targets imply upside of about 28%, 39% and 29%, respectively.
"Tower multiples are deeply depressed, and the stocks are looking for a catalyst against a rising-rate backdrop," analysts led by Madison Rezaei wrote.
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Crown Castle rose 15.6% on Friday, American Tower gained 9.3% and SBA added 7.3%, extending an after-hours move Bernstein described as appropriate. Blockspace's earlier coverage covers the deal and the initial selloff in telecom carriers.
Under the agreement, SpaceX will acquire all of Grain's nationwide 800 MHz portfolio, which covers up to 14 MHz of paired spectrum. The deal requires FCC approval, and the price was not disclosed. Grain bought the licenses from T-Mobile in a deal that closed August 11, for which T-Mobile received $2.9 billion in cash and all of Grain's 600 MHz licenses.
The tower thesis rests on low-band spectrum. Bernstein modeled a greenfield SpaceX network and found that even a small amount of low-band spectrum cuts the number of sites needed by about 30%, because lower frequencies cover more ground per site. Grain's portfolio was the only obvious low-band option, the analysts wrote.
In Bernstein's national scenario, which covers 92% of the US population on the ground, required macro sites fall from 85,858 to 56,705 with Grain's spectrum. Network construction costs excluding spectrum drop from $43.6 billion to $29.7 billion. Including spectrum, total costs fall from $79.5 billion to $71.5 billion, because the savings on sites outweigh the added cost of the licenses.
Across its build scenarios, Bernstein estimates a total cost of $50 billion to $130 billion including spectrum and 30,000 to 120,000 macro sites. Those sites would be spread unevenly across the tower companies, but the analysts called the outcome positive for all three. The model assumes the network sits almost entirely on existing structures, since the US builds only 1,200 to 2,000 genuinely new towers a year.
SpaceX's own regulatory filing points the same way. Deployment "will rely on radios feeding sectorized antennas on towers, rooftops, and other structures," the company said in its application to the FCC. The filing does not commit SpaceX to leasing any number of sites from any landlord.
"We still favor a partnership outcome for SpaceX Mobile," the analysts wrote, and they named a wholesale MVNO arrangement as the most likely result. Buying the spectrum, they added, "is not a commitment to build a nationwide network."
The analysts see value for towers even without a full build. They said the deal weakens the argument that satellite direct-to-device service makes towers obsolete, and it gives tower owners a credible potential new tenant whether any build is large or selective.
Bernstein says the pace of any build would be limited by crews, zoning and utility interconnection rather than by capital, and its national case with Grain would take about eight years at maximum construction pace. SpaceX has said it plans to launch its mobile business by late 2027, using a next-generation satellite constellation that Bernstein calls a significant step up from today's service.
"It's still a very limited amount of spectrum and to get reliable building penetration in urban areas SpaceX would have to deploy an extensive network of towers on the ground which would be expensive," satellite analyst Tim Farrar told PCMag . He added that SpaceX would need modified satellites to use the lower frequencies from orbit.
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Bernstein still expects SpaceX to partner with a carrier, but it says Grain's spectrum could put "some wind back in the TowerCos' sails."
