SpaceX agrees to buy Grain's 800 MHz spectrum for Starlink Mobile

SpaceX agreed on Thursday to buy all of the nationwide 800 MHz spectrum owned by Grain Management, an investment firm focused on digital infrastructure, for Starlink Mobile. SpaceX described the portfolio as up to 14 megahertz of paired spectrum.

Paired means one block for a phone to send and one for it to receive. In a July order, the Federal Communications Commission, the FCC, identified the licenses as 817 to 824 MHz paired with 862 to 869 MHz. Each block is 7 megahertz, and the two together are the 14 megahertz at the top of the range SpaceX described.

Starlink Mobile is SpaceX's satellite link to ordinary phones. It already reaches a phone that can see the sky.

800 MHz is a lower frequency than the 2 GHz band SpaceX already holds, and lower frequencies get through walls. SpaceX said the 2 GHz spectrum will supply capacity in the United States, and that these licenses are what lets the signal reach a phone inside a building.

"This prime low-band spectrum addresses one of the key remaining technical gaps that will pave the way for Starlink Mobile to become a major mobile carrier in the US," the company said.

Elon Musk, SpaceX's chief executive, called the spectrum "the last critical piece of the spectrum puzzle needed for SpaceX to provide complete phone coverage in America."

In that July order, the commission approved T-Mobile's sale of the licenses to Grain and set a conditional path for service straight to phones. Grain completed the purchase in August. This sale still needs the commission's approval, and the usual closing steps, before SpaceX can use the licenses.

For that August purchase, Grain paid T-Mobile $2.9 billion in cash and gave T-Mobile all of Grain's 600 MHz licenses. Thursday's agreement left its price unstated. The same spectrum was valued at $6 billion in August, and that valuation is not this deal's price.

Carrier shares fell after the close

Grain announced the agreement at 4:17 p.m. Eastern Time, after the regular session had ended. AT&T, Verizon and T-Mobile had all closed higher.

Around 7:40 p.m. Eastern Time, on a quote halfway between what buyers were bidding and what sellers were asking, not a completed trade, AT&T and T-Mobile were each 6.7% below their regular closes, and Verizon was 5.7% below. SpaceX, which trades on Nasdaq, was 2.5% above its close on the same kind of quote.

The case for the drop is a fourth network that could start a price war and take share from three national carriers. A fund of U.S. telecom stocks, CIYZ, holds Verizon, AT&T, T-Mobile and SpaceX.

On an August 4 earnings call, Gwynne Shotwell, SpaceX's president and chief operating officer, spoke about those three companies.

"I anticipate us to be able to acquire quite a few of their customers because I think our service will be better."

SpaceX said most phones already in use support the 800 MHz band. A customer can use the phone they already have.

That is what makes this a threat to the carriers. The phone works on these frequencies, and the licenses are meant to reach it indoors.

The next move belongs to the FCC: whether it approves the transfer, and when.