SpaceX, Spectrum and the Unbundling of Telecom Infrastructure

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The recent transaction between SpaceX and Grain Management has raised quite a kerfuffle in the market. The announcement was followed by sharp drops in the stock prices of major US telcos, which collectively lost billions in market cap.

The deal is unusual because Grain Management is not a telco by traditional standards, and challenges the assumption that valuable mobile spectrum must remain on the balance sheet of a Mobile Network Operator (MNO), or be managed and transferred between telcos, although non-MNO spectrum ownership and secondary market transactions are not new to the industry. More importantly, the convergence of terrestrial and space-based connectivity use cases is bringing renewed excitement to the industry.

What I find interesting though, is what this signals when it comes to ownership and management of telecom infrastructure.

Why Spectrum Matters for SpaceX?

To drive SpaceX's direct-to-device ambitions, having satellite constellations is just one part of the equation. Coverage and propagation are the other parts of that equation.

What a terrestrial spectrum does is help solve the perennial problem of the need for direct-line-of-sight often associated with non-terrestrial network services.

Without going into the specifics in the physics of radio waves, low-band spectrum travels further and penetrates buildings and other obstacles more effectively. The combination of space-based connectivity and complementing terrestrial spectrum and infrastructure creates a more seamless user experience instead of just relying on satellites alone.

And spectrum is just the beginning. While DTD services may remove the need for a conventional terrestrial tower for the last-mile connection, they do not eliminate the terrestrial infrastructure layer.

Satellite gateways still need fibre and terrestrial transport that involves site acquisition, power, and interconnection. Starlink would either have to build these assets itself, or lease and access them from existing operators and infrastructure providers. Companies such as AST SpaceMobile are pursuing a similar model through partnerships with mobile operators.

Asset Sharing is Not New

The separation of infrastructure ownership from service delivery is not new in telecom; it is simply too expensive and onerous to operate in a full asset ownership model.

Towers have moved into towercos. Fibre networks are commonly accessed through commercial leases, capacity agreements, IRUs and interconnection arrangements. Mobile operators have formed joint ventures and consortiums to share both radio access networks and spectrum. Subsea cables, data centres and international connectivity assets are often financed and owned by parties other than the operators that ultimately use them.

For operators, the more strategic question is what should be owned, what can be shared, leased, or accessed through an IRU or commercial lease, and where it makes sense to partner.

Operators want to own the assets that provide differentiation, control or resilience. They share assets where scale and reach is more valuable than individual ownership, and partner where the other party brings better capital, technology or execution capabilities.

And this brings us to another more interesting question: what happens when an investor can own or control a critical input into the telecom industry without ever owning a telco?

Access, Control and Ownership: What Does the Investor Actually Own?

Traditionally, an investor seeking access to telecom infrastructure might invest in a telco. This provides exposure to spectrum, towers, network equipment, customer bases and operating cash flows. But it also comes with the complexity of running a telco, spanning competition, customer acquisition, pricing pressures, technology cycles, regulatory obligations, as well as continual capital investments.

But what if the investor could access selected parts of the infrastructure stack without owning the entire telco? What investors try to own, finance or control are critical resources required for telco operations.

And this is where the distinction between the right to operate and the right to own becomes important. A company with the right to operate a private network, or access an operator's network, may not own a spectrum or infrastructure right that can be transferred, leased, financed or sold. However, that right can still be valuable if it provides an exclusive or long-term right to use the asset and commercialise it.

For investors, the value depends on what these rights confer: their type, tenure, exclusivity, renewal prospects, transferability, contractual cash flows and exposure to regulatory change.

Regulation is Part of the Asset

The more valuable and strategically important the critical input, the greater the regulatory scrutiny. Scarcity, limited substitutability, and national security considerations can significantly increase the value of an asset, but at the same time, limit who can own it, how it can be used, and whether it can be transferred.

None of this can happen without regulatory approval.

Spectrum is a finite public resource and closely regulated. What is changing hands is not the absolute ownership of the airwaves, but a license to use them, subject to conditions imposed by regulators. The SpaceX-Grain Management transaction remains subject to FCC approval, while the earlier T-Mobile <-> Grain spectrum exchange deal was approved with specific conditions surrounding the use and deployment of the spectrum.

The decision on whether spectrum can be transferred, leased, combined or repurposed lies with the regulator. The regulator can impose buildout requirements, usage conditions, coverage and operational obligations, and restrictions on ownership. Depending on the licence class, the rights may also be subject to specific legislation and regulatory frameworks established under domestic law.

In some jurisdictions, proposed transactions that involves telecommunication assets are also subject to public consultation, industry submissions and scrutiny from other stakeholders. The outcome is therefore shaped not only by the regulator, but also by the broader policy and industry debate surrounding the transaction.

There are also sovereignty concerns. While global technology suppliers may provide components across the value chain, an end-to-end satellite operator controls the infrastructure, routing, software and availability of a communications service, while carrying vast amounts of data, traffic metadata and location information at the same time. This creates a deeper dependency on a company with significant strategic and commercial interests linked to another sovereign country.

The regulator can then assess whether the proposed owner or use case is consistent with competition, national-security and public-interest objectives.

Regulation is therefore not just a hurdle at the end of a transaction. It shapes the asset from the beginning. And for investors, regulatory design directly affects both valuation and exit value.

That is the broader investment lesson. The work extends beyond identifying scarce and strategically important assets, but to understand the regulatory pathway that allows them to be used, monetised and transferred.

SpaceX vs Telcos Relationship

Someone remarked to me that SpaceX will become the biggest telco in the world. While I've written something similar previously, I won't dismiss the possibility, but I would question the label.

Will SpaceX take away a significant amount of value from telcos? Definitely. We've already seen the capital markets reacting. SpaceX has the potential to become the world’s most important connectivity platform by reach and strategic influence. But it won't achieve that by simply becoming another MNO. Its advantage comes from combining space-based networks, terrestrial spectrum, infrastructure, devices and partnerships across markets. And its financial and political clout is significant that it transcends the conventional regulatory approval pathways.

The more likely outcome is not one company replacing the telcos, but a new connectivity stack in which different companies own, operate, share and partner across different layers of the value chain, including the suppliers and manufacturers of equipment that enable interoperability between NTN and terrestrial networks.

India is a good example of how this may play out. Starlink’s engagement has reached the highest levels of government, but political access doesn't eliminate the need to navigate licensing, security clearances, spectrum allocation and local operating requirements. While Starlink has secured a GMPCS licence in India, its path to full commercial operations still hinges on satisfying these conditions, or successfully advocating for regulatory accommodations that may relax or modify them.

The commercial question is equally important, unless monetisation is not yet on the radar. India’s telecom industry is fiercely competitive, and Starlink may struggle to undercut mature operators where infrastructure, distribution channels and customer support are already well established. While it might have a competitive edge in underserved and specialised use cases, the propensity to pay is uncertain. To win these customers, it needs more than market access and right to operate. It also needs local distribution, customer support, network operations and credible day-two service capabilities. A satellite network may be global, but the customer experience remains local.

Companies like Singtel, Tata Communications, Vodafone and NTT have also evolved beyond being connectivity operators, with some either operating or reselling satellite services as well. Moreover, LEO is not the only non-terrestrial network option. High-altitude platform stations (HAPS) offer another model, sitting between terrestrial networks and satellites.

What Starlink changes is not the direction of travel, but the structure of the ecosystem shaped by global connectivity platforms, diversified telcos, infrastructure owners and sovereign regulators, each owning or controlling different parts of the stack.

One thing for sure is, value extends beyond the physical network. It also sits in the rights that make the network possible, the partnerships that provide access to local markets and the regulatory permission to use these rights.