Telecom investors got some great news from SpaceX CEO Elon Musk. He expects to launch mobile wireless service in two to three years.
(He's always late.)
Verizon Communications reported better-than-expected third-quarter profits Monday. Shares dropped 3.5% in response. Investors have been paralyzed by fears that SpaceX is on the cusp of launching a fourth national mobile wireless service, which will siphon off customers from Verizon, AT&T, and T-Mobile US.
"I...operate under the assumption that everything SpaceX says they will do, they will do and that they will execute flawlessly," said Verizon CEO Dan Schulman on his company's earnings conference call. "In suburban and urban areas, where like 98% of our revenue are, we're somewhere between 100 to 1,000 times more efficient than they are...I think that SpaceX realizes this, and they're exploring a potential path to creating a terrestrial network."
Fully building out that network will require $300 to $500 billion and take a minimum of four years, Schulman said. It could take as long as eight years to accumulate all the required hardware and wireless spectrum.
Musk shot back that SpaceX will take two to three years.
That's half the time. The thing is, however, Musk is famously optimistic.
In 2016, Musk made one of his original predictions about self-driving cars. Teslas were going to make fully autonomous cross-country trips in 2017. Tesla's driver-assistance technology is impressive. And it launched a robo-taxi service in 2025. Late. And in 2019, he predicted Tesla would have more than a million cars on the road with full self-driving software that is "feature complete at a reliability level that we would consider that no one needs to pay attention."
In 2020, Musk unveiled his goal to sell 20 million electric vehicles a year -- possibly by the end of the decade. Tesla has sold a lot of EVs, but it has never sold 2 million in a calendar year. Wall Street currently projects 2030 EV sales of 2.5 million.
He's also made some wilder statements. He's suggested Tesla robo-taxis will eventually handle most of the world's driving and that SpaceX will handle a majority of the world's internet traffic.
It's a good idea to discount Musk's statements and add some years to initial timelines. Don't forget the Cybertruck and new Roadster were introduced in 2019. Cybertruck didn't ship until 2023. Roadster production is slated for 2028.
The Roadster, however, will fly. Under Musk's guidance, SpaceX and Tesla do a lot of amazing things. Schulman's mindset is probably correct: Prepare for perfect execution even if timelines are likely to slip.
For investors, a SpaceX mobile service launch in 2032 and beyond means some recent fears are unjustified. The wireless industry has time to prepare and will be making money in the interim.
Through Monday trading, Verizon stock was down 7% since SpaceX announced its purchase of low-band spectrum on Oct. 8. Shares were down 17% from their 52-week high, leaving them trading at about 8 times expected earnings over the coming 12 months, down from 10 times earlier in the year. T-Mobile and AT&T shares have been hit harder than Verizon stock, down about 35% and 29%, respectively, from their 52-week highs.
SpaceX stock was up 0.8% in premarket trading at $148.05, while S&P 500 and Dow Jones Industrial Average futures were both up less than 0.1%. Verizon stock was up 0.3% after dropping 3.5% on Monday.
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