The mobile ambitions of SpaceX are hitting telecom stocks again. Here's what the latest developments mean.

An earlier version of this report misspelled the name of Citigroup analyst Michael Rollins and provided an incorrect date for Crown Castle's earnings call. By Jules Rimmer

Shares of 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 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 a story citing people characterized as familiar with the matter suggesting that serious negotiations are in progress 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. T-Mobile's stock (TMUS) fell 7.7% on Friday, while Verizon (VZ) dipped 1.2% and AT&T's (T) fell 8%.

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 (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 SpaceX's chief operating officer, 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." The team highlighted Crown Castle, SBA Communications (SBAC), American Tower and EchoStar (ECHO) as buy recommendations. 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 SpaceX coverage, the analysts said, and it could take a decade to approach a 20% market share.

After a sharp 9% dip Thursday, SpaceX shares rebounded about 2% on Friday, and those of Crown Castle jumped 9%.

-Jules Rimmer

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10-23-26 1711ET