The $5 Billion Phone The Market Rejected

I’ll bet there’s a few of the veteran members in our investment community that have heard of a company called Iridium. 

Back in 1998, Iridium switched on one of the most ambitious projects ever attempted. 

What they did was set up a network of 66 satellites that could carry a phone call to anywhere on Earth; Motorola led the effort at a cost of around $5 billion.

To be fair, the pitch was kind of hard to ignore. 

It meant that we could take our phone to the middle of the ocean, the top of a mountain, or a stretch of desert with no towers for a hundred miles… and it would still work.

The problem was actually the phone itself. 

You see, at the time a handset was the size of a brick and cost about $3,000, which isn’t to mention the fact that calls ran anywhere from $6 to $30 a minute. 

Meanwhile, ordinary cell networks were spreading across the map and getting cheaper every year.

By August, 2999, Iridium filed for bankruptcy. 

Why? Well, because a network that cost billions to build sold for about $25 million.

The lesson at the time was that satellites simply couldn’t compete with towers. 

And for the next 25 years, nobody argued that point… until last week, when SpaceX made a huge move. 

Musk agreed to buy a nationwide block of low-band wireless spectrum from Grain Management for reportedly $8 billion. 

As you might expect, telecom shares sank the moment the news broke. 

What’s interesting is that Musk ISN’T making another Iridium. 

So you’re probably wondering, “Why spectrum?”

First, know that wireless spectrum comes in bands, and the band you hold decides what your network can do. High bands carry a lot of data, but the signal doesn’t travel far. On the other side, low bands carry less, but they go a long way and punch through walls, trees, and buildings. 

That’s why the big carriers fight over them.

And lately, SpaceX has been busy collecting. 

You may remember earlier this year when Musk bought 65 MHz of mid-band spectrum from EchoStar for $17 billion, a deal that the FCC approved back in May. 

However, what it lacked was low-band, which the company itself called “one of the key remaining technical gaps” for Starlink Mobile.

Now it’s time to fill that gap. 

The plan should be clear by now, too. 

SpaceX wants to run a hybrid network, with satellites handling wide-area coverage and ground radios on towers and rooftops handling the local work. We’ve moved beyond mere satellite phones, dear reader — Musk wants to become a carrier!

What’s interesting is that this news shouldn’t really be a shock to anyone. 

After all, SpaceX told us last June that it was weighing a ground-based U.S. mobile network and a retail Starlink phone product, and it laid out the tower plan on its August earnings call. 

It’s the spectrum that makes the plan workable.

Of course, the FCC approved an application for 15,000 more satellites (the same week) aimed at direct-to-cell service, and Starlink already has about 12 million customers in 205 countries, with more than 11,000 satellites working overhead.

For a company with the rockets, the satellites, and now the spectrum, it’s close to an open door.

For the carriers that spent decades building towers, there’s finally some real competition.

And that’s what opens the door for individual investors like us.

You know as well as I do that you can’t run a national wireless network from space without an enormous number of satellites, and that each and every single one of them needs antennas, sensors, power systems, and chips. 

To be fair to Musk, SpaceX builds a lot of that itself. 

However, it can’t handle the full demand, and once the rest of the market sees where this is heading, the herd will be racing to find those hidden investment gems raking in a fortune from SpaceX’s bulging coffers. 

Just consider the scale for a minute…

Starlink has launched nearly 13,000 satellites so far, and more than 1,800 of them have already come back down and burned up.

So, you can imagine that replacing satellites on a schedule is built into the business, which makes for a long order book for whoever builds the parts.

Hardly anyone asked who makes the parts. In fact, we made the same point when Starship first reached orbit recently. 

The rocket is the delivery truck, which makes those satellites the precious cargo. 

This spectrum deal shows the cargo is worth a lot more than most people were giving it credit for.

A few experts have already pinpointed this opportunity, like my colleague Jason Simpkins, who has spent months digging into exactly this. His readers have been taking advantage of those elite, little-known companies that supply SpaceX and stand to benefit as it builds momentum. 

I’ll let him show you all the details himself right here.

I strongly recommend you check it out.