The mobile ambitions of SpaceX see telecom stocks get hit again. What the latest developments mean.

An earlier version misspelled the name of Michael Rollins. It also gave an incorrect date for Crown Castle's earnings call. By Jules Rimmer

Shares in America's three largest mobile-phone carriers fell sharply on fears of SpaceX competition

While Starlink offers satellite-based internet services, it is looking to add cellular infrastructure for a broader offering.

Elon Musk's SpaceX is in talks with cellular-infrastructure providers as part of an ambitious project to create America's fourth nationwide wireless carrier. That would mean competition - and trouble - for its future rivals: T-Mobile, Verizon and AT&T, and shares of all three are falling.

Talk of this development in the strategy of Elon Musk's rocket-launch and satellite-technology company has been circulating in the market for several weeks, but late Thursday, Bloomberg published an article, citing people familiar with the matter. The report suggested that serious negotiations are already under way between SpaceX (SPCX) and at least one major cellular-infrastructure provider.

While the trio of national carriers chalked up gains and outperformed the S&P 500 benchmark index Thursday, news of the reported discussions between SpaceX and tower operator Crown Castle was received badly by investors. In premarket trading Friday, T-Mobile's stock (TMUS) plunged 4.3%, Verizon's (VZ) 3.7% and AT&T's (T) 3.3%.

Chris Hillabrant, chief executive officer of Crown Castle (CCI), was asked about the reports during his company's third-quarter earnings call Wednesday and did not give a denial. "You can assume we're talking to all parties," he said in response to questions. Apart from Crown Castle, the other two major operators of cellular towers are American Tower Corp (AMT) and privately held Vertical Bridge.

The Bloomberg article suggested SpaceX was looking to lease or acquire 80,000 cell sites across the U.S. It currently offers satellite-based Starlink internet service, but on the second-quarter earnings call a few months ago, both Musk and COO Gwynne Shotwell hinted at proposals to build a comprehensive mobile service that would require low-band spectrum for coverage and in-building access.

On Thursday, Citi's telecom team, led by Michael Rollins, described the SpaceX push into mobile as "net-positive for the tower stocks and net-negative for the telcos." They highlighted Crown Castle, SBA Communications (SBAC), American Tower and EchoStar (ECHO) as buy recommendations as a result. The lease agreements that SpaceX would sign could be worth "billions of dollars," the report suggested.

Share prices of all three national carriers have been under pressure in the last few weeks, but, according to the Citi analysts, they will have time to restructure and develop strategies to compete. It would take three to five years to build out the coverage, they said, and it could take a decade to approach a 20% market share.

After a sharp 9% dip Thursday, SpaceX shares rebounded 3% on the news in pre-market trading Friday, and those of Crown Castle jumped 7%.

-Jules Rimmer

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10-23-26 0732ET