Spends 8 billion to buy spectrum; investment bank Pivotal is bullish on SpaceX (SPCX.US) becoming the fourth-largest U.S. carrier, reiterates "Buy" rating.

Investment bank Pivotal Research Group said SpaceX (SPCX.US) could emerge as the fourth-largest U.S. mobile carrier after reaching an agreement to acquire nationwide spectrum licenses for about $8 billion. The firm raised its price target on SpaceX from $220 to $230 while reiterating a "Buy" rating. In an October 12 research note, analyst Jeffrey Wlodarczak said SpaceX's planned acquisition of Grain Management's 800 MHz spectrum portfolio could help Starlink expand from satellite broadband into traditional mobile phone service, initially targeting rural and suburban customers. The new price target implies about 55% upside from the $147.95 share price cited in the report. The deal, announced on October 8, involves up to 14 MHz of paired spectrum and still requires approval from the U.S. Federal Communications Commission (FCC). According to Pivotal , the reported $8 billion purchase price has not been confirmed by either party. Grain acquired the spectrum from T-Mobile (TMUS.US) in August for $2.9 billion in cash plus additional spectrum licenses. For investors, the acquisition could open a new revenue stream for SpaceX while building a communications network that supports Elon Musk's broader businesses, spanning Tesla, Inc. (TSLA.US), autonomous vehicles and Siasun Robot&Automation. Pivotal believes that combining satellite connectivity with existing Starlink broadband equipment could allow SpaceX to compete with traditional carriers at a far lower infrastructure cost. The strategy relies on combining the newly acquired 800 MHz band, which can penetrate buildings and is compatible with existing phones, with roughly 2 GHz of spectrum previously obtained through the EchoStar transaction. The FCC also recently approved a constellation of 15,000 second-generation satellites supporting direct-to-device communications, half of which must be operational by October 2032 and the rest by October 2035. Unlike traditional mobile carriers that rely on massive networks of cellular base stations, SpaceX can use Starlink antennas equipped with mobile radios to extend coverage to homes and surrounding communities. Pivotal estimates this approach, excluding spectrum acquisitions, would cost about $10 billion, compared with $50 billion to $100 billion for a traditional nationwide base station network. Wlodarczak expects Starlink Mobile to initially attract existing Starlink broadband users, who can bundle home internet with mobile service, with indoor calls relying heavily on Wi-Fi. The analyst sees more limited opportunities in densely populated urban markets, where established carriers have much larger spectrum reserves and network capacity. Pivotal forecasts that Starlink Mobile will have about 160 million subscribers globally by 2036, including 50 million in the U.S. and 110 million internationally. That would represent about 13% of the U.S. mobile device market and 1.5% of international markets excluding China. The firm assumes average revenue per user of about $22 per month globally by 2036. The analyst expects Starlink Mobile to begin adding subscribers in late 2027 or 2028, with EBITDA turning positive in 2030. The business's EBITDA could reach about $3.5 billion in 2032 and $15 billion by 2036, corresponding to a 40% margin. Pivotal estimates cumulative capital expenditure of $30.6 billion from 2027 to 2036, including $22.5 billion for spectrum and $8.1 billion for satellites. Beyond consumer-facing wireless services, Wlodarczak also sees strategic value in a communications network that can be controlled by SpaceX and Musk's other businesses independently of traditional carriers. Such infrastructure could support Tesla, Inc. vehicles, Cybercab autonomous taxis, Optimus humanoid Siasun Robot&Automation and energy facilities, while reducing reliance on third-party wireless providers. Pivotal also expects that established carriers may eventually buy wholesale access to Starlink's network to improve coverage in sparsely populated areas. The report raises questions about the long-term impact on telecom infrastructure suppliers. Although Pivotal does not expect immediate pressure on dividends at established carriers such as AT&T (T.US) and Verizon (VZ.US), the firm believes Starlink's lower-cost architecture could eventually reduce demand for some rural cellular base stations. The analyst also cautioned that overseas expansion will require additional spectrum acquisitions and regulatory approvals, which may be difficult to obtain. The bullish outlook comes with significant financial and execution risks. Pivotal estimates that SpaceX may need about $900 billion in additional financing over the next decade to support its broader expansion into satellite communications, launch services and AI infrastructure. Other concerns include delays in Starship development, potential shareholder dilution, regulatory hurdles, and the company's heavy reliance on Musk. The firm's valuation also depends heavily on financial performance near the end of its 10-year forecast period. Separately, Morgan Stanley analyst Adam Jonas reiterated an "Overweight" rating and $300 price target on SpaceX in an October 11 report focused on the upcoming 15th flight of Starship. Morgan Stanley views progress toward fully reusable rockets as a potential catalyst for the stock, saying lower launch costs and greater payload capacity could accelerate Starlink deployment and expand opportunities in AI infrastructure and orbital computing. Both firms see SpaceX's launch capabilities as central to its long-term growth, though Pivotal's latest report focuses more on the potential disruption the company could bring to the wireless telecom market.