Key points
- Verizon CEO estimates a SpaceX ground network could cost $300 billion to $500 billion
- Verizon CEO says a SpaceX build would take at least four to six years
- Verizon CEO rejects an MVNO deal with satellite providers
A SpaceX (SPCX) ground-based mobile network could cost $300 billion to $500 billion over seven or eight years, Verizon (VZ) chief executive Dan Schulman estimated on Monday. Speaking on Verizon's earnings call, he said building the network would take "a minimum of four to six years."
His estimate is substantially higher than TD Cowen's reported figure of more than $80 billion, though the figures may cover different costs and time periods. It also comes days after a report that SpaceX is in talks for access to at least 80,000 U.S. cell sites. Schulman was answering a question from Michael Rollins of Citi about Starlink entering the mobile business.
What Schulman says a SpaceX network would need
"If they build one, they're going to look at 65,000-80,000 macro sites," Schulman said. Macro sites are the full-size cell towers and rooftop sites that carry most mobile traffic. He said SpaceX would also need backhaul, the links that carry traffic away from those sites. He expects that to be "some combination of fiber, and maybe some satellite." It would need radio equipment and "a tremendous amount of spectrum."
After the network, "then they need to build retail, customer service, back office systems, et cetera," Schulman said. At that point, he said, SpaceX would have "the possibility of becoming the sixth, not the fourth, the sixth competitor in the market." He didn't name the other companies he was counting.
Schulman said that without a ground network, SpaceX's addressable market for broadband services is "relatively small. It's in very rural areas." In suburban and urban areas, "where like 98% of our revenues are, we're somewhere between 100x-1,000x more efficient than they are," he said.
"We know who they're talking to on towers," Schulman said. He added that a SpaceX ground network would "basically look and feel like every other network" and said, "There's no magic wand. There's no secret sauce. There's no shortcut."
SpaceX's tower talks and other cost estimates
Bloomberg reported on October 22 that SpaceX is in talks for access to a minimum of 80,000 cell sites, and named Crown Castle (CCI) as one of the tower companies involved. On October 23, the next trading day, AT&T (T) closed down 8.0% and T-Mobile (TMUS) closed down 7.7%, while Crown Castle closed up 9.1%. Verizon closed down 1.2% that day.
Earlier this month, SpaceX agreed to buy 800 MHz spectrum from Grain Management. On Monday, the FCC posted a SpaceX letter asking regulators to add the 902-928 MHz band NextNav wants to a proposal on satellite service to phones.
"Building a network would cost more than US$80 billion, according to TD Cowen," Reuters reported on October 16. In the same story, Julie Zhu, a research analyst at MoffettNathanson, said, "In the decade or so leading up to 2023, the big three spent about $650 billion in capex to build in networks that ostensibly were already finished."
Verizon's position on satellite partners
Rollins also asked whether Verizon would offer an MVNO deal to satellite companies, including Starlink. An MVNO, or mobile virtual network operator, sells phone service on capacity it rents from another carrier's network. "I see absolutely no benefit whatsoever to extending an MVNO deal to any satellite provider," Schulman said.
"I do think there is a role for satellite, for sure. In remote areas, it is a great service for those customers," Schulman said. He added that Verizon could work with satellite providers "either directly or through our JV."
Verizon shares were down about 3.6% at $43.05 as of 2:26 p.m. ET on Monday.
"We look forward to being able, in four to six years, to finally punch back, and we will punch back hard when that happens," Schulman said.
