AT&T Starlink threat may be years away, analyst says
Wolfe Research says SpaceX’s Starlink is not an immediate AT&T problem after strong second-quarter subscriber gains.
By Sal Moretti · Money Reporter
3 min read
The AT&T Starlink threat that rattled telecom stocks may be arriving later than nervous investors feared, according to Wolfe Research analyst Peter Supino, who said SpaceX would need years to build the wireless muscle needed to challenge major carriers.
Supino wrote in a Thursday note to clients that Starlink could try to force its way into mobile service, but he said acquiring and clearing the necessary spectrum would take years. His note, titled “Starlink Shmarlink!,” marked a more upbeat view on AT&T after the company’s latest quarterly results.
Supino had cut his rating on AT&T late last year as SpaceX, Starlink’s parent, prepared for an initial public offering. At that point, he was concerned about AT&T’s ability to keep raising prices and saw possible trouble from SpaceX and a foldable Apple iPhone.
Will Starlink threaten AT&T?
Starlink is SpaceX’s satellite-internet business, best known for using satellites to provide broadband service. Analysts cited by MarketWatch say it could eventually pressure broadband and mobile providers, but several say a direct wireless challenge would take time because SpaceX would need access to the right spectrum.
AT&T gave investors a stronger near-term story on Wednesday. The company reported a net gain of 432,000 postpaid phone subscribers in the second quarter, a figure MarketWatch said was well above expectations.
The company also beat expectations on adjusted earnings per share and reported growth in fiber and fixed-wireless internet customers. Supino said AT&T’s customer gains across businesses, along with fewer device upgrades, pointed to progress in its strategy of selling both internet and mobile service to the same households.
AT&T’s postpaid-phone churn, a measure of customers leaving the service, fell by one basis point from a year earlier even after price increases, according to the report. That gave analysts another data point for the idea that bundling internet and wireless plans is helping the company hold onto customers.
Oppenheimer analyst Timothy Horan also pointed to the shift in the wireless business. In a client note, he said the industry is moving away from device subsidies while pushing bundled service plans, a trade-off he said can support customer volumes and reduce churn while weighing on average revenue per user.
Horan said AT&T likely has a “few solid quarters” before Starlink becomes a major worry. He still warned that telecom companies are underestimating the satellite threat, saying he expects pressure from SpaceX on broadband in the medium term and on mobile later.
Horan downgraded AT&T to perform last month, citing the risk that Starlink could take market share. BNP Paribas analyst Sam McHugh has also said the Starlink concern hanging over wireless stocks could last until next year, according to MarketWatch.
How did telecom stocks react?
AT&T shares fell 16.5% in June as analysts warned about SpaceX’s possible impact on traditional telecom companies, according to FactSet data cited by MarketWatch. T-Mobile dropped 10.6% in the same month, while Verizon Communications lost 11.4%.
Those stocks have recovered some of that ground in July, according to the report. T-Mobile, which is already a SpaceX partner, reported earnings Thursday, while Verizon is scheduled to report second-quarter results Friday.
SpaceX is also reportedly discussing a mobile-phone partnership with Charter Communications, which is due to report earnings Friday. TD Cowen analyst Gregory Williams wrote in a recent client note that any SpaceX entry into wireless could be bearish for the industry.
This story draws on original reporting from MarketWatch.