Apple’s (AAPL) results could look very different in a few years if SpaceX’s (SPCX) Starlink becomes a major player in the wireless industry.
Elon Musk’s rocket company announced late last week that it had acquired a national portfolio of low-band spectrum. This positions Starlink, Musk’s satellite business, to challenge traditional wireless giants such as AT&T (T), Verizon (VZ) and T-Mobile (TMUS) in the United States.
This challenge could pose a major threat to Apple, said Wamsi Mohan, an analyst at BofA.
“The key implications for Apple are (1) risk to the carrier subsidy model, (2) potential for a competitive device that takes share, (3) integration with the Tesla/SpaceX ecosystem, including Grok, creates an end-to-end competitor including AI capabilities,” Mohan explained in a new note Monday.
Mohan estimates that about 53 million iPhones pass through the big three wireless carriers each year, with a combined promotional credit of $800 per unit. Subscribers who switch to Starlink potentially lose the subsidy, which could lengthen their replacement cycle or lead to a trade-in to lower-end phones.
A shift of 10% of the Big 3’s postpaid phone subscribers to SpaceX could cost Apple about 5 million units, or $6 billion in revenue, Mohan said.
“A shift with a low-cost Grok-powered SpaceX phone and carriers cutting promotions on their remaining base could potentially be higher,” Mohan said. “We see the biggest risk as the valuation multiple, where the debate is over the pricing power of the iPhone in the US and the sustainability of the US premium mix with lower carrier subsidies.”
He added: “In the short term, carriers are likely to fight back with bigger promotions, a tailwind for upgrades. Starlink Mobile runs on unmodified handsets, so most switchers either stick with or buy iPhones.”
Brian Sozzi is the editor-in-chief of Yahoo Finance, host of the Sozzi unleashed the morning show and Power Actors with Brian Sozzi podcast and member of the Yahoo Finance editorial leadership team. Follow Sozzi on @BrianSozzi, InstagramAnd LinkedIn. Any advice on stories? Email brian.sozzi@yahoofinance.com.
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