Bernstein’s Madison Rezaei: SpaceX plan to buy spectrum portfolio is good for tower operators

>> ALL RIGHT, WELCOME BACK TO THE EXCHANGE. SPACEX STOCK IS HIGHER A LITTLE BIT RIGHT NOW 3/10 OF 1% BECAUSE THEY INKED A DEAL TO PURCHASE NATIONWIDE CELL PHONE SPECTRUM. THEY WANT TO PUSH DEEPER INTO THE TELECOM MARKET VIA THEIR STARLINK DIVISION. NOW THAT NEWS, MAYBE IT'S NOT MOVING SPACEX, BUT IT'S MOVING AT&T. IT'S MOVING VERIZON IT'S MOVING T-MOBILE. THOSE STOCKS ARE DOWN 9 OR 8%. IT'S ALSO A BIG STORY FOR THE CELL PHONE TOWER OPERATORS. AMERICAN TOWER, CROWN CASTLE, SBA COMMUNICATIONS, THEY'RE ALL GOING UP SIX, 7 OR 11%. AND THOSE COMPANIES MAY BE THE BIG WINNERS HERE AS THEY HAVE TO BUILD OUT MORE TOWERS. MADISON, RAZAGHI IS SENIOR ANALYST COVERING COMMUNICATIONS INFRASTRUCTURE AT BERNSTEIN AND JOINS US NOW. MADISON, GREAT TO HAVE THIS CONVERSATION. I WOULD IMAGINE THE MARKET'S REACTING. IT'S TELLING A STORY. IF STARLINK IS GOING BIGGER INTO BASICALLY THE CELL PHONE BUSINESS, ARE WE GOING TO NEED THAT MANY MORE NEW TOWERS? >> RIGHT. BRIAN. >> SO WE'RE NOT BUILDING A BUNCH MORE TOWERS, BUT WHAT WE SUDDENLY HAVE IS A NEW CARRIER ON THE TOWER COMPANIES. THINK OF THEM TODAY. THEY REALLY ONLY HAVE THREE CUSTOMERS, RIGHT? AT&T, T-MOBILE AND VERIZON. AND MAYBE WE COULD HAVE A FOURTH WITH THIS NEW SPACE NEWS. >> OKAY, SO THEY'RE GOING TO MAKE MORE MONEY THEN OFF THE TOWERS THAT EXIST. >> YES, EXACTLY. >> HOW MUCH HOW MUCH MORE MONEY? I HAVE NO IDEA HOW MUCH MONEY A CELL PHONE TOWER MAKES. >> IT'S PROBABLY SOMETHING LIKE A 10 TO 15% BUMP IN RECURRING REVENUE FOR THE TOWER COMPANIES. SO THINK OF THEM KIND OF LIKE APARTMENT BUILDINGS. THEY RENT SPACE AND RINGS ON THE TOWERS THEMSELVES. ONCE YOU'VE BUILT UP THE TOWER, EVERY INCREMENTAL TENANT THAT YOU ADD IS VERY, VERY PROFITABLE. AND AGAIN, THEY'RE CAPPED OUT IN TERMS OF THREE CARRIERS TODAY. SO THIS COULD BE ANOTHER ONE. >> YEAH. AND CROWN CASTLE IS THE BIG WINNER TODAY. I ASSUME THE MARKET HAS FIGURED OUT WHO STARLINK MAY USE MORE OF. DO YOU DO YOU AGREE WITH THE MARKET REACTION. HOW DOES THAT LINK UP OR SYNC UP WITH YOUR RECOMMENDATIONS? >> SURE. SO CROWN IS THE BEST BENEFICIARY TODAY BECAUSE THEY HAVE THE MOST, MOST PROPORTIONATE NUMBER OF U.S. TOWERS. CROWN IS A U.S. ONLY PURE PLAY. AMERICAN AND SBA BOTH HAVE LARGE DOMESTIC FOOTPRINTS. AMERICANS IS A LITTLE BIT BIGGER THAN SPACEX, BUT CROWN IS PURE PLAY U.S. SO THEY'RE JUST PROPORTIONATELY REWARDED HERE. >> YEAH. AND YOU'VE GOT LET'S SEE, I'M GOING THROUGH $214 PRICE TARGET ON AMERICAN TOWER, $96 PRICE TARGET ON CROWN CASTLE. BIG MOVES TODAY. YOU WANT TO ARE YOU LOOKING TO MAYBE RAISE SOME OF THESE TARGETS OR ARE YOU HAPPY WHERE THEY ARE. >> WELL, IT'S CERTAINLY NOT SOMETHING WE'RE GOING TO SAY ON AIR, BUT WE'VE BEEN SITTING ON THESE PRICE TARGETS AND WE FEEL GOOD ABOUT THEM TODAY. TOWERS HAVE BEEN EXTREMELY DEPRESSED SINCE THE SPACE XS1. THERE WAS A LITTLE BIT OF NARRATIVE OVERHANG OF IS SATELLITE COMING TO EAT TERRESTRIAL WIRELESS NETWORKS? I THINK THE CLEAR ANSWER HERE IS NO. WE'VE BEEN SAYING THAT FROM THE TIME OF THE S-1. BUT TO US, THIS IS SORT OF A SIGNAL THAT SPACE X IS REALLY ENDORSING THE FACT THAT YOU NEED TERRESTRIAL WIRELESS NETWORKS FOR MOBILE TO WORK. >> WE JUST MADE YOU YOU JUST MADE YOUR HEAD OF COMPLIANCE AND DIRECTOR OF RESEARCH VERY HAPPY BY NOT GOING INTO THE YOU'RE VERY, YOU'RE VERY YOU'RE VERY WELCOME. IS THERE A CHANCE THE MARKET'S GETTING THIS WRONG? MADISON. I MEAN, JUST BECAUSE STARLINK IS BUYING THE SPECTRUM, I MEAN, THE MARKET'S REACTING AND SAYING, OKAY, THIS IS GOING TO GET BUILT OUT. I MEAN WHAT IF IT DOESN'T OR IS IT IS IT A IS IT A FAIT ACCOMPLI? >> I THINK. >> I CERTAINLY AM NOT A MIND READER, AND I'M NOT SURE THIS WOULD BE MY JOB IF I WAS. BUT THERE ARE A COUPLE OF DIFFERENT WAYS THAT SPACEX CAN POTENTIALLY OFFER A MOBILE MOBILE SOLUTION HERE. THEY CAN BUILD THEIR OWN NETWORK, WHICH IS WHAT WE'RE TALKING ABOUT TODAY. AND I ACTUALLY DON'T THINK THAT'S THE MOST LIKELY SCENARIO. THEY CAN PARTNER WITH ONE OF THE WIRELESS CARRIERS, WHICH IS PROBABLY THE MOST LIKELY SCENARIO, BUT THEY'RE ALL IN DETENTE AND DON'T WANT TO GIVE THEM A DEAL. OR THEY COULD BUY SOMEONE, WHICH AGAIN, WE'RE NOT REALLY IN A POSITION TO SPECULATE ABOUT, BUT PROBABLY IS NOT THE MOST LIKELY SCENARIO HERE. SO WHAT WE'RE ALL TRYING TO DO IS LIKE A PROBABILITY WEIGHTING OF ARE THEY GOING TO BUILD? ARE THEY GOING TO PARTN