- Verizon, AT&T and T-Mobile all fell by double digits on Friday after SpaceX announced it is buying spectrum to beam cellular service from Starlink satellites, potentially becoming a major mobile carrier. Since the 10-year Treasury yield crossed 5% on September 15, Verizon and AT&T are down 14% and T-Mobile 13%.
- The dividend arithmetic no longer works. Verizon yields 6.4%, among the ten highest in the S and P 500, against a 10-year Treasury above 5.3%. That leaves roughly 110 basis points of compensation for accepting equity risk, competitive threat and no growth, which is what Michael Cuggino of Permanent Portfolio means when he says a similar yield is available risk-free.
- Growth is disappearing on consensus forecasts before SpaceX arrives. T-Mobile’s revenue rose 8.5% in 2025, is projected at 6.8% this year and is seen slowing to 2.2% by 2029. Verizon’s 2.5% increase in 2025 looks like a near-term peak, with growth not expected to exceed 2% for three years, and AT&T’s is seen below 3% through 2029.
- The threat is distant but the sentiment effect is immediate. Third Bridge analyst John Conca noted SpaceX needs substantial and costly terrestrial infrastructure to compete in dense markets, and said this is more about sentiment than near-term fundamentals, but that even a small chance of losing significant share frightens investors.
What Happened?
Days before the SpaceX announcement, the three carriers unveiled a joint venture to expand satellite-enabled connectivity and eliminate US mobile dead zones, which Bloomberg Intelligence said should help neutralise Starlink Mobile’s ability to offer contiguous coverage. T-Mobile pointed to a post from its chief technology officer arguing terrestrial networks are better suited to indoor coverage and density; AT&T and Verizon did not respond to requests for comment. The pressure extends to Europe, where Deutsche Telekom is down 8.6% this year and a gauge of European telecom stocks has fallen 18% from a May peak. SpaceX itself trades 25% below the peak it reached within days of its June listing. AT&T reports on October 21, with Verizon and T-Mobile following the week after.
Why It Matters?
SpaceX is the catalyst rather than the cause, and separating the two matters for how this is priced. These companies were bought as bond proxies: a high dividend with a modest growth kicker. Consensus forecasts now show T-Mobile decelerating to 2.2% growth by 2029 and Verizon unable to exceed 2% for three years, which removes the growth leg entirely, and the 10-year Treasury at 5.3% removes most of the yield advantage. A 6.4% dividend against a 5.3% risk-free alternative is 110 basis points for accepting competition from a well-capitalised entrant, regulatory risk and no earnings growth. That calculation deteriorated before the spectrum announcement and would be uncomfortable without it. Rising rates damage these companies twice over, which is the part most coverage misses. They make the dividend less competitive against Treasuries, and they raise the cost of the capital spending required to respond to a new competitor. Cuggino’s point follows directly: if SpaceX forces higher investment to defend share, that money comes from buybacks, dividends or earnings, any of which affects the multiple. The sector’s defining feature, returning cash to shareholders, is the thing competition would take away. The disruptor’s own position is worth noting. SpaceX trades 25% below its post-IPO peak and has fallen further this week, while seeking $40 billion to buy Nvidia chips and needing to build a terrestrial network that Conca describes as costly. Its ability to fund both simultaneously, in a market where CoreWeave’s bonds have gone distressed and AI credit is repricing, is not assured. The competitive threat is real and it is also contingent on continued cheap capital, which is precisely what is now in question.
What Next?
AT&T reports October 21 with Verizon and T-Mobile the following week, and capital expenditure guidance matters more than earnings, since any increase to counter satellite competition confirms Cuggino’s thesis about cash available for dividends. Watch FCC progress on the SpaceX spectrum acquisition and any disclosure of terrestrial network plans, costs and timing, because without those the threat remains theoretical. The joint venture between the three carriers is the defensive response to monitor. For income investors the simpler question is whether these yields compensate for the risk relative to Treasuries, and at 110 basis points over for Verizon the market is currently saying they do not.
Affected Tickers and Coins: VZ, T, TMUS, SPCX, DTE
Source: Bloomberg
