SpaceX risks its hard-earned credibility with a mobile phone gamble: Thomas Black

SpaceX has built credibility through Falcon 9's reliability and Starlink's profits, but its latest ambition, a full mobile phone service to rival AT&T, Verizon and T-Mobile, has unsettled wireless analysts. Chief Operating Officer Gwynne Shotwell outlined plans to use femtocells on existing Starlink antennas, but analysts note these are mostly in rural areas, limiting reach. Shotwell also overstated the big three carriers' combined revenue by roughly $250 billion, undercutting confidence in the pitch. The plan hinges on new satellites, spectrum bought from EchoStar and possible tie-ups with broadband firms. This story centres on US carriers and spectrum specifically, so no direct South African angle applies, though Starlink users locally may watch SpaceX's broader direction with interest..By Thomas Black.SpaceX has earned credibility with its shake-up of the launch industry after introducing Falcon 9’s reusable rocket. Elon Musk’s space company then proved critics wrong by making money from a 10,000-satellite network in low Earth orbit that provides high-speed internet to rural areas and to vehicles on the move.The company is on the cusp of making the first commercial launch of Starship, the huge, fully reusable rocket, at the end of this month. Few, if any, doubt this spacecraft is going to work as advertised after a successful test launch in July. Even the extreme tempo of daily Starship launches a year from now doesn’t strain credulity based on the frequent and safe launches of Falcon 9.Adding to SpaceX’s trustworthiness are its top managers, especially Chief Operating Officer Gwynne Shotwell and Chief Financial Officer Bret Johnsen. Unlike Tesla Inc.’s top executives, who have been in their current positions for less than four years, Shotwell has run SpaceX since 2008, and Johnsen has overseen its finances since 2011. The result of their work was SpaceX’s record-breaking initial public offering that raised $86 billion. Shotwell and Johnsen have earned investor trust.This is why investors are confident that SpaceX will land astronauts and tons of material on the moon and later travel to Mars. They have even been willing to accept the possibility of data centers in space that will tap the sun’s power almost 24 hours a day and somehow overcome the delays of processing and sending data from space. The possibility of these data centers was demystified a bit in the company’s initial earnings call on Tuesday, with Musk saying that these satellites will essentially be “optimized” Nvidia Vera Rubin NVL72 computers that SpaceX will begin to launch next year.The company’s AI business is tapping into feverish demand for computing power that outstrips capacity, and Johnsen said the payback on this investment is less than a year. The AI buildout accounted for 82% of SpaceX’s large capital expenditures in the first half of this year, according to the company’s initial earnings report.So why put that credibility at risk with unrealistic ambitions to take on the mobile phone giants?Shotwell dropped hints on the call that SpaceX wants to build a “true mobile service” that will steal customers from the big three carriers — AT&T Inc., Verizon Communications Inc. and T-Mobile US Inc. These three have a large competitive moat because of their cell tower infrastructure and wireless spectrum, which would require enormous investment to replicate.The danger for SpaceX is even more spending on top of AI to only get a phone service into the “almost there” zone, similar to humanoid robots and driverless taxis at Tesla. Investors do expect Musk to toss out ideas that strain credibility, and most of them don’t work out. They work best when he is surrounded by seasoned executives with their feet firmly planted in what’s possible today.That makes the mobile service ambition all the more curious. Shotwell said that SpaceX’s direct-to-device service, which is now offered through a partnership with T-Mobile in areas where the carrier doesn’t have coverage, will get 100 times better because of higher-capacity satellites that will launch next year coupled with the 65 megahertz of wireless spectrum purchased from EchoStar Corp. The investment to build out ground infrastructure won’t cost as much as analysts expect because of “great and new ideas for how we’re going to do that,” she said.The plans are in early stages, she said, but include placing small cellular base stations, or femtocells, on the existing Starlink antennas for high-speed internet that customers place on rooftops to gain an unimpeded view of the sky. “I think it will be quite capex efficient,” Shotwell said.This is where Shotwell lost the thread with wireless-carrier analysts who were listening to the earning call.“In our view, the credibility of their plans in wireless remains questionable,” Sam McHugh, a telecom industry analyst with BNP Paribas, wrote in a note. The problem is that Starlink antennas are mostly in rural areas, which limits the ability to deploy the femtocells.Greg Williams, an analyst with TD Securities, echoed that sentiment in an email: “Putting small cells on receivers seems like a hodge-podge, Swiss-cheese experience that would not match a terrestrial coverage experience.”Shotwell hurt her case more when she said the big three wireless carriers have revenue of roughly $600 billion. The amount is more like $350 billion, and even lower when counting just mobile-phone service. The misstep reinforced “our view that their wireless ambitions and plans are highly embryonic, and not yet fully fleshed out / credible,” McHugh wrote.Still, investors in the wireless industry were trading on the real possibility of SpaceX disruption. Shares of the big three carriers dropped on Wednesday, adding to declines leading up to SpaceX’s earnings report.The picture won’t clear up until SpaceX either reaches a deal with one or more of the large carriers or scoops up a large amount of spectrum in a key July 2027 auction. Another strategy would be for SpaceX to partner with broadband operators to offer mobile service. Bloomberg reported in June that Charter Communications Inc. held talks with SpaceX executives..Read more:.Starship setback: SpaceX rocket explodes in seventh test flight.Rocket launches either succeed or fail, and the result is immediately apparent. In other words, you can’t fake it ’til you make it. That’s not the case with direct-to-device technology. It will take a while for SpaceX to assemble a sizable network of these second-generation, direct-to-device satellites that have 10 times the capacity. It may take even longer to know whether the small-station ground infrastructure can truly work and at what cost. We still don’t know SpaceX’s solution for signal disruption when indoors.Musk has a long history of overpromising and underdelivering. SpaceX doesn’t need to risk its hard-won credibility on a full-service mobile phone business that faces large, entrenched competitors and may never get out of the “almost there” zone..© 2026 Bloomberg L.P..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here

SpaceX risks its hard-earned credibility with a mobile phone gamble: Thomas Black

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