SpaceX is coming for telecom. I'm buying its landlord.

Elon Musk is out to conquer the world.

Actually, no. Scratch that.

He’s out to conquer the universe. He’s made that very clear through both his statements and his actions – including the immense amount of money he’s spent and continues to spend in pursuit of this massive conquest endeavor.

Speaking of astronomical goals, Musk apparently believes that SpaceX (SPCX) could become more valuable than the entire global economy one day. Just last month, he wrote on X:

That's quite a statement. And if anyone else would have made it, I’d probably dismiss it outright.

But this is Elon Musk we’re talking about, the world’s richest man and one of the most determined individuals I’ve ever known of. Considering his track record with Tesla (TSLA), SpaceX, and Starlink, I’m hesitant to brush his claim away.

The market certainly seems to be taking him seriously. It’s increasingly fearful that he’ll disrupt everything from artificial intelligence (AI) to telecommunications thanks to Starlink’s satellite constellation, (projected) fully reusable Starship rocket, and massive financial resources.

While traditional wireless carriers may be biting their nails, I’m not sure if cell tower real estate investment trusts (REITs) are worried. Like me, they may very well see the SpaceX threat as an actual growth catalyst for their industry.

A very, very large one, for that matter.

On October 8, SpaceX announced its agreement to buy Grain Management's nationwide 800 MHz wireless spectrum portfolio.

The transaction still needs regulatory approval. But if it does go through, it will represent an important step toward Musk’s goal to build an expansive U.S. mobile communications business.

He already has an enormous satellite network that brings connectivity to remote areas. Yet this deal-to-be opens the possibility for conventional terrestrial wireless service as well.

SpaceX is reportedly hoping to enable its initial next-generation mobile service in early 2028. Which could very well happen. Though make no mistake of it: Building a nationwide network that can compete with established carriers will be a much taller task.

Competitors like AT&T (T), T-Mobile (TMUS), and Verizon (VZ) have spent hundreds of billions of dollars over decades to develop their operations. Replicating that kind of reach will take time and effort.

That’s why I’m not counting traditional wireless carriers out just yet – even if that opinion isn’t popular right now. The market has seen all three fall over the last 90 days:

But here’s the thing…

Yes, SpaceX will add new competition to an already competitive industry even if it doesn’t completely take over. However, T-Mobile especially might be able to handle those changes much better than investors realize.

Its direct-to-cell partnership with SpaceX, for one thing, gives it both a business “in” to the latest round of disruptive technology and experience in using satellite connectivity. Moreover, T-Mobile has a significantly larger and more diversified spectrum portfolio than SpaceX.

It’s also not dependent on future regulatory approvals or network developments.

Nor is AT&T or Verizon, for that matter. The former maintains strong recurring cash flow and a solid dividend. While the latter features attractive upside potential at its currently depreciated price point – complete with a 6%+ dividend yield.

Let me be clear: I’m not predicting a future where all three wireless carriers go on to compete in relative peace with SpaceX. As I always say, I don’t have a crystal ball. And neither does anyone else.

I just don’t believe investors should automatically count these companies out. They still have distinct investment appeal I can’t ignore.

With that said, I see even more appeal in the cell tower infrastructure these carriers rely on. Specifically in the three major publicly traded U.S. REITs:

These companies have endured their own challenging period thanks to everything from higher interest rates to elevated financing costs. Asset dispositions, too.

Plus, Sprint and T-Mobile’s merger in 2020 made a lot of room for consolidation… and therefore for a lot of lease cancellations. And DISH-related network changes added even more concerns to the pile.

Fortunately, those last two issues were one-time events. So cell tower REITs are moving beyond them more and more.

It certainly helps how wireless data needs just keep expanding. That’s why Wide Moat Research forecasts about 5% cash flow growth for the cell tower sector next year – and more than 5% for 2028.

Keep in mind that this recovery doesn’t even mean SpaceX has to become a new tower customer. That possibility would just be icing on the cake.

All around, it’s hard not to like the kind of risk-reward proposition I’m seeing here.

All three of the big cell tower REITs could easily (and obviously) benefit from improving wireless demand. And the same goes for any extra business as SpaceX starts moving into terrestrial communications.

But out of the three, I have a definite favorite in American Tower.

On the one hand, Crown Castle has made clear progress in simplifying its business after it sold its fiber and small-cell operations in May for $8.5 billion. I’m not trying to downplay that, but I also don’t want to ignore its decreased organic leasing activity.

Ultimately, I’d like to see Crown Castle address that concern before I can put my investment faith in it. Its comparative growth prospects just aren’t wowing me for the time being.

SBA Communications, for its part, is a high-quality operator worth paying attention to with its approximate 45,000 communications sites worldwide. Moreover, it’s apparently attracted interest from infrastructure investors and might be exploring a sale.

Yet American Tower still stands out more with its own massive cellular site network and CoreSite data center platform portfolio.

The latter asset bundle consists of 30 operating facilities that take up about 3.9 million rentable square feet. So the REIT actually benefits from two separate power sources behind the (still very relevant) AI trade: expanding wireless connectivity and growing data center demand.

This is all backed by a compelling financial position, with American Tower reporting $10.6 billion of liquidity in Q3. And its net leverage was 4.9x adjusted earnings before interest, taxes, depreciation, and amortization.

Management also remains confident in the future – enough so to raise its full-year adjusted funds from operations (AFFO) guidance from $11.00–$11.17 to $11.04–$11.16 per share.

So Wall Street can worry all it wants about whether SpaceX will decimate wireless carriers or not. I’m going to bypass that debate altogether with a company that can benefit from multiple trends.

I see good things for American Tower up ahead, and I’m more than happy to participate in its upside.

Happy SWAN investing,

Brad Thomas
Editor, Wide Moat Daily