Grain Management

Last week, SpaceX agreed to buy a big chunk of low-band spectrum to expand the Starlink network.

That spectrum's been traded around the telecom business for decades now, but SpaceX's ambitious plan is to build, quote, "The world's most advanced mobile network." Combined with the news that the FCC approved the deployment of 15,000 next-gen Starlink satellites and the company's previous agreement to purchase $20 billion worth of EchoStar spectrum last year, it's now clear that SpaceX is serious about competing with AT&T, Verizon, and T-Mobile.

I've covered the telecom business for a long time, and I've always known these companies can say they want to do something until they run into the harsh reality of how expensive it is to actually do it.

The telecom graveyard of pivots, bad ideas, and failed acquisitions is vast.

Walt has been closely monitoring SpaceX acquisitions, though, and he's correctly predicted that SpaceX was headed in this direction for months now.

So I wanted to dig in to whether SpaceX can pull this off, why Walt thinks the existing telecom companies have really fumbled their response to SpaceX's growing threat, and what happens when Elon Musk's rocket company jumps headfirst into a business that everyone loves to hate.

Before we get going, do me a favor and subscribe to Decoder on YouTube, where we put out new episodes every Monday and Thursday.

Okay, Lightshed Partners' Walter Piecyk on the harsh reality of SpaceX's mobile wireless plans.

Sounds great, but the service is not nearly as good as the service provided by telecom providers.

Now, Starlink announced that it was acquiring Grain Management's fourteen megahertz of eight hundred megahertz spectrum.

Now, I don't want to get too technical, but this will definitely improve Starlink's service in the US.

However, as best as I can tell, this is still not nearly good enough.

And speaking of rails, the most interesting non-AI infrastructure story today came from Ben Thompson's Stratechery update on October thirteenth, SpaceX buys more spectrum, Musk and market structure distributed cellular.

Thompson discussed the Wall Street Journal report that SpaceX reached a deal to buy eight hundred megahertz cellular spectrum licenses from Grain Management for about eight billion dollars in cash.

These are US licenses tailored for terrestrial wireless service from cell phone towers, not just satellite to handset communication.

The market reaction was immediate.

And obviously we saw what happened to Verizon, AT&T, and T-Mobile in the after hours.

But the interesting part is this, right? So Spectrum was actually owned by Grain Management.

yeah so why did they why did they buy that well we know that starlink is satellite service but in order to reach customers on a wide scale you got to have some low bandwidth and so the low bandwidth signal travels through like the 800 um gigahertz that they oh the megahertz that they bought it can travel on low areas it can travel in rural areas it can penetrate through some buildings small businesses so that's important if you're starlink grain management used to be owned by a telecommunications company named T-Mobile.

So think about this.

They sold the low bandwidth to grain management and Starlink came and bought it from grain management.

So T-Mobile sold the company that is now about to disrupt their industry.

And it's disruption because again, we know that they can be in places that most phone companies can because they have a satellite service we know that they can be in dead zones where most telecommunications can't because of the satellite service they can be in plenty of rural areas where sat where uh ground service can't be they can't be in plenty of countries countries that don't even have that infrastructure yet so it is a disruption what they can't do with satellite and this is the part that people have to understand is that in order to have millions and millions and hundreds of millions people using the service you can't just use satellite you got to have some ground infrastructure so as long as those companies and these companies i mean verizon's been here forever t-mobile has made its imprint obviously you know taking over sprint at t has uh fiber optics And they have phone service, so they have a combination there.

This is a big one.

They have just agreed to pay roughly $8 billion in cash to a private equity firm called Grain Management.

$8 billion, just a staggering number.

Right.

It just wouldn't connect.

Exactly.

Now, the TechGenyz report details that SpaceX is purchasing 100% of Grain Management's nationwide 800 MHz spectrum.

800 MHz.

For those that may not know or that may not have listened to today's Wall Street Breakfast Podcast, SpaceX's $8 billion deal to buy a nationwide low-band spectrum portfolio sparked a sudden sell-off in major telecom stocks.

Grain Management said in a statement that SpaceX will acquire 100% of Grain's nationwide spectrum portfolio, and consequently, telecom shares dipped in pre-mar- pre-market action.

T-Mobile, Verizon, AT&T were all down roughly 6%.

Steve, what else would you add to that story?