Telecommunications giant AT&T (NYSE:T) saw its shares slide 5.2% to $21.55 by late morning Monday, underperforming the broader communications sector as investor sentiment shifted sharply against legacy wireless carriers. The decline came amid reports of a potential partnership between SpaceX's Starlink and Charter Communications, as well as Comcast's announcement that it would split into two separate public companies.
The Communication Services Select Sector SPDR Fund (NYSEARCA:XLC) gained 1.8% on the day, while the SPDR S&P 500 ETF (NYSEARCA:SPY) rose 1.3%, highlighting the stark divergence within the sector. AT&T's drop was part of a broader sell-off in traditional telecom stocks, with Verizon (NYSE:VZ) falling 6.9% to $43.34 and T-Mobile US (NASDAQ:TMUS) declining 4.7% to $174.06. In contrast, cable and satellite plays surged, with Charter Communications (NASDAQ:CHTR) jumping 11.9% to $149.53, Comcast (NASDAQ:CMCSA) gaining 7.1% to $24.82, and SpaceX (NASDAQ:SPCX) rising 2.3% to $156.82.
Starlink-Charter Talks Fuel Competitive Fears
The pressure on AT&T and its peers intensified after Reuters reported that SpaceX and Charter Communications have held executive-level discussions about a potential consumer mobile-phone partnership in the U.S. The report, citing Bloomberg, noted that Charter declined to comment and SpaceX did not immediately respond. According to the Financial Times, SpaceX has told investors it plans to launch a U.S. Starlink mobile offering, which would directly compete with Verizon, AT&T, and T-Mobile.
This threat is not new. Oppenheimer analyst Timothy Horan warned investors earlier this month that they may be underestimating the risk low-earth-orbit satellite broadband poses to AT&T, as reported by MarketWatch. The market's reaction on Monday suggests that the potential for a Starlink-Charter partnership is being taken seriously, particularly as it could accelerate the shift of subscribers away from traditional wireless carriers.
Comcast Breakup Reshapes Sector Dynamics
Comcast's announcement that it will split into two public companies—one focused on cable, wireless, and business services, and the other housing NBCUniversal and Sky—added another layer of complexity to the communications landscape. PP Foresight analyst Paolo Pescatore told Reuters, "Connectivity and media are no longer naturally moving at the same speed," underscoring the strategic rationale behind the breakup. Comcast shares jumped nearly 8% on the news, while Charter climbed 11.2%, reflecting investor enthusiasm for pure-play connectivity assets.
Meanwhile, AT&T remains committed to its fiber and wireless strategy, with no plans for another major acquisition. CFO Pascal Desroches told the Mizuho Technology Conference that the company's focus is on organic growth and maximizing its recent assets. "We don't need to do anything at this stage," he said, adding that "AI doesn't exist without our connectivity." Desroches also noted that AT&T acquired approximately 4.5 million fiber passings from Lumen Technologies (NYSE:LUMN) for about $5.8 billion, with plans to more than double that number over five years.
Spectrum Auction and Financial Outlook
The recent spectrum auction results provided mixed signals for the industry. According to Light Reading, citing FCC data, Verizon acquired 82 AWS-3 licenses for $3.16 billion, T-Mobile secured 102 licenses for $277.78 million, and AT&T took just 10 licenses for $120.77 million. Roger Entner of Recon Analytics described AT&T's bidding as "very selective and judicious," but his main takeaway on SpaceX was blunt: "The big takeaway is that Elon is coming."
For investors, the trade-off is clear. AT&T's share price decline has boosted its dividend yield to approximately 5.2%, based on the annualized dividend of $1.11 per share. The company's planned shareholder payouts of more than $45 billion represent close to 30% of its current market value of $151.4 billion. However, the same cash flow must support fiber expansion, spectrum investments, and debt reduction, all while SpaceX and other competitors reshape the competitive landscape.
AT&T expects stronger wireless service revenue growth in the second quarter compared to the first, along with more advanced home internet net additions and free cash flow between $4.0 billion and $4.5 billion. The company will report its Q2 results before the market opens on July 22, with an earnings call scheduled for 8:30 a.m. ET.
