Elon Musk slams telecom giants with plans for Starlink

Elon Musk is causing turmoil in the US stock market with SpaceX. The space company wants to play a greater role in mobile communication with its satellite network Starlink.

Investors fear that traditional telecom companies will lose customers and revenue as a result. Nevertheless, several analysts think that the fear has passed and that interesting opportunities are emerging right now.

SpaceX is working on technology that allows smartphones to connect directly to satellites. This allows users to get coverage even in places where traditional cell towers are missing. Concerns increased after SpaceX acquired mobile frequency space from investment firm Grain Management.

The announcement put pressure on telecom stocks. Subsequently, Verizon, AT&T and T-Mobile lost an average of eleven percent of their market value on October 9. Their shares were therefore on average about 26 percent below their highest price of the previous year.

Still, Citi analyst Michael Rollins thinks it's too early to write off traditional telecom companies. According to him, building a fully-fledged mobile network takes years and billions of dollars. In addition, SpaceX needs additional infrastructure on the ground. Cooperation with existing telecom providers may therefore be more obvious than direct competition.

According to analysts, T-Mobile is one of the companies that may have been punished too harshly. The telecom provider has about 400 megahertz of frequency space, compared to about 80 megahertz for SpaceX. That difference gives T-Mobile an important advantage in offering mobile capacity.

In addition, T-Mobile is expected to achieve average annual profit growth of around 24 percent over the next two years. The stock would trade at about eleven times expected earnings at the same time. According to Barron's analysis, this combination makes the company attractive.

AT&T is also in the spotlight. The company published better than expected quarterly results, but nevertheless saw its share fall by 6.4 percent. Citi analyst Rollins uses a price target of $28, while JPMorgan analyst Sebastiano Petti assumes a price target of $31. According to Rollins, his price target means a possible recovery of about 33 percent.

The unrest also affects companies that manage cell towers. Crown Castle owns more than 40,000 cell towers in the United States. Although satellites can increase mobile range, cell towers remain important in places where many people connect at the same time.

Bernstein analyst Madison Rezaei therefore sees recovery potential at Crown Castle and has a price target of $92. The stock also offers a dividend yield of about 4.9 percent.

Viasat is also mentioned as a possible contender. The satellite company focuses, among other things, on communication for governments and the defence sector. William Blair analyst Louie DiPalma estimates the value of the company at around $20 billion, compared to an enterprise value of around $13 billion.

At AST SpaceMobile, price movements are even greater. The stock would have fallen about seventy percent from an earlier peak above $130. Still, Deutsche Bank analyst Bryan Kraft remains optimistic, with a price target of $93.

AST SpaceMobile, like SpaceX, develops technology that allows smartphones to connect directly to satellites. The companies are thus competing in a market that is still in full development. How quickly satellite connections can complement or replace traditional mobile networks remains uncertain for the time being.