On October 26, Verizon Communications (VZ) reported its strongest third-quarter wireless subscriber growth in five years and raised its full-year forecast.
Adjusted profit beat analysts’ expectations. Revenue is missed. The stock price still fell 3.49% to close at $43.10.
The main issue with the earnings call wasn’t the phone upgrades or the scope of the guidance. This is about Starlink.
Chief Executive Dan Schulman said Verizon is willing to work with satellite providers, including Elon Musk’s SpaceX, to expand coverage in areas where terrestrial networks cannot.
Still, he drew clear lines on what the collaboration wouldn’t include.
Verizon’s only deal with Starlink
Schulman said satellite links have a legitimate role in rural and hard-to-reach areas where it’s not economical to build cellphone towers. He said Verizon sees the possibility of pursuing coverage arrangements through direct partnerships or joint ventures with satellite providers.
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This is a different arrangement from the MVNO deal. Mobile virtual network operator agreements allow companies to sell wireless services through another carrier’s infrastructure without owning the underlying network.
Schulman said there are no backdoors in Verizon’s existing MVNO contracts and no plans to create backdoors for satellite companies.
“I see absolutely no benefit in extending the MVNO agreement to any satellite provider,” Schulman said on the earnings call.
The line Shulman draws separates the two outcomes. Among them, satellite providers fill the coverage gap for Verizon’s customers in remote areas and increase the value of Verizon’s network. Satellite providers, on the other hand, use Verizon’s infrastructure to attract these customers with competing mobile services.
Verizon is open to the first one. Schulman said the second one has not yet been considered.
Verizon already has a satellite coverage arrangement through a partnership with AST SpaceMobile, which uses low-Earth orbit satellites to extend coverage to standard smartphones.
The deal represents the approach Schulman outlined: satellite-based services filling gaps in Verizon’s terrestrial network without giving the satellite company direct access to Verizon’s core customer base.
Why Starlink can’t replace Verizon yet
Schulman said Verizon takes SpaceX’s plans seriously and believes the company will execute on them. His objection to viewing satellites as an imminent competitive threat stems from how much infrastructure SpaceX would need to build to reach Verizon’s level of ground coverage.
To replicate Verizon’s network, Schulman estimates SpaceX will need 65,000 to 80,000 macrocell sites, as well as backhaul infrastructure, radio access equipment and meaningful spectrum holdings. He estimated the cost at $300 billion to $500 billion, with physical construction taking four to six years.
He also addressed the argument that Verizon should offer Starlink network access as a defensive move to prevent SpaceX from finding another route to customers.
“When this happens, we will fight back vigorously,” Schulman said.
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How Verizon delivered its best quarterly subscriber results in five years
Verizon’s third-quarter results showed adjusted earnings per share of $1.31, compared with consensus estimates of $1.27. Revenue was $34.31 billion, below expectations of $34.74 billion. The company said the revenue shortfall was due to fewer device upgrades following the removal of handset subsidies.
The increase in wireless subscribers is the most eye-catching number. Verizon said its third-quarter results were its strongest in five years, and the company raised its full-year financial outlook alongside the results.
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The net increase of postpaid phones was 406,000 units, an increase of more than 820% over the same period last year. The total number of broadband connections reached 314,000 in the quarter, with fixed wireless and fiber optic connections totaling 17.4 million.
Postpaid phone churn improved to 0.94% from 0.98% a year ago, indicating that fewer existing customers are leaving the network despite Verizon’s elimination of phone subsidies.
Investors weighed earnings growth and subscriber momentum against revenue declines. On October 26, the day the results were released, the company’s stock price closed down 3.49% to $43.10.
Why Musk disagrees with Verizon’s math
Schulman’s timeline has already prompted public reaction. Musk disputed that prediction and said SpaceX could build a competitive terrestrial network in two to three years, about half the time Schulman outlined during the call.
Whether SpaceX goes down this path depends on more than just timelines. Bloomberg reported days before Verizon reported earnings that SpaceX was in active talks with cellular infrastructure companies to secure access to at least 80,000 cell towers, which is near the upper end of Schulman’s own estimate of what a competing network would need.
The talks suggest SpaceX is moving beyond satellite coverage and into direct competition on the ground.
Schulman’s cost estimate assumes SpaceX follows a traditional wireless buildout capital structure: acquire spectrum, build macro sites from scratch, operate backhaul and radio equipment.
If SpaceX could ensure website access through a third-party agreement, rather than building the infrastructure directly, the cost and time would be greatly reduced.
This is the scenario Verizon is preparing for. Starlink’s development into the mobile field has put pressure on the three major U.S. companies. Schulman’s point is that a full-scale land-building plan is much more difficult from an economic perspective than Musk’s plan.
The pace at which SpaceX is progressing through those 80,000 live talks is a number worth watching.
SpaceX currently operates Starlink as a satellite broadband service and has conducted limited direct equipment testing with select operators. Getting into full retail wireless requires more than cell site access.
SpaceX also needs consumer distribution, customer service infrastructure, regulated spectrum licenses across multiple bands, and backend systems to support a national user base.
Schulman said his estimate of $300 billion to $500 billion excludes those costs entirely. Retail operations, customer service, and back-office systems are not included in the diagram.
The investment required to reach Verizon’s scale as a consumer carrier will be higher than the numbers he puts into phones.
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