T-Mobile US Inc. (NASDAQ:TMUS) has lost 14.5% of its value since Oct. 8 amid fears that Elon Musk‘s SpaceX (NASDAQ:SPCX) could challenge America’s established mobile operators. But telecommunications expert William Webb believes investors are overreacting.
Webb told Benzinga that investors are exaggerating the threat from Musk, given the enormous cost and difficulty of building a network capable of competing with the established carriers.
“I might very slightly downgrade the stock,” he said, “but only by one or two percent, not seven to 15%.”
Webb, a former UK telecom regulator and co-author of Beyond the Tower, said shares typically recover after Musk-related scares as investors realize he “hasn’t actually said anything that’s sensible.”
The latest selloff followed reports that SpaceX is seeking access to at least 80,000 U.S. cell sites, including through discussions with Crown Castle Inc. (NYSE:CCI).
AT&T Inc. (NYSE:T) fell nearly 8% Friday, while Verizon Communications Inc. (NYSE:VZ) declined 1.2%.
Why Webb Doubts Musk Will Follow Through
Webb argues that Starlink’s direct-to-device (D2D) technology, which connects ordinary smartphones to satellites, cannot replace conventional mobile networks.
Satellite signals struggle to penetrate buildings, while limited capacity makes serving densely populated cities difficult.
To compete with T-Mobile and its rivals, Musk would need to build a terrestrial mobile network alongside his satellites.
Webb said Musk’s financial resources could allow SpaceX to hire enormous numbers of engineers and secure access to cell towers, potentially building a competitive network within two to three years, rather than the five to ten years such a project might otherwise take.
But he questioned why Musk would invest so heavily in a mature industry offering relatively modest returns.
For now, however, Webb believes Musk can still walk away without suffering substantial losses.
Webb said SpaceX could potentially recover much of its spectrum investment by selling the licenses to established operators.
“If he stopped now, he’s not lost very much money at all,” Webb said.
Building a terrestrial network would be another matter. Webb estimates that $20 billion or more in infrastructure spending would become largely sunk costs, money SpaceX could not recover if the project failed.
A Real Threat If Musk Succeeds
Webb acknowledged that a successful fourth nationwide carrier could eventually reduce incumbent valuations by around 20% through greater competition and lower customer revenues. He stressed that the figure was speculative.
Citi takes a more pessimistic view of the current threat, identifying 29% to 32% potential valuation risk for major U.S. carriers, implying a further 4% to 16% downside from levels at the time of its assessment.
On Polymarket, traders assigned a 35% probability to SpaceX launching its own U.S. mobile plan by December 2027, although the contract has attracted only about $14,000 in trading volume.
Crucially, SpaceX could satisfy the contract by becoming a mobile virtual network operator (MVNO), selling its own phone plans using an established carrier’s network.
Webb suggested this could be Musk’s most economically sensible option, allowing SpaceX to enter the mobile market without spending tens of billions building a competing network.
But Webb acknowledged that the established carriers might be reluctant to help Musk enter their market.
T-Mobile reports third-quarter earnings Wednesday, Oct. 28.
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