Street Calls of the Week
Investing.com -- Deutsche Telekom traded lower on Tuesday following SpaceX’s $17 billion agreement to buy AWS-4 and H-block spectrum licenses from Echostar.
The drop signaled investor concern over the extent to which Starlink, SpaceX’s satellite unit, could challenge U.S. telecom operators, including T-Mobile US, the crown jewel in Deutsche Telekom’s portfolio .
At present, T-Mobile US uses Starlink services to cover roughly 13% of the U.S. landmass where cellular networks are unavailable.
The service, restricted to text messaging, is marketed to fill “dead zones.” Bernstein analysts noted that Starlink’s broader spectrum position “should increase the range of services beyond SMS available to customers,” which could enhance T-Mobile’s average revenue per user. Still, “any increase is likely to be paid back to Starlink to use their service.”
The larger risk is whether Starlink will continue as a partner or eventually evolve into a competitor.
“In principle, Starlink could use its enhanced spectrum position to compete directly with TMUS (as well as AT&T and VZ) across the full US footprint,” Bernstein said. Such a shift could trigger price pressure across the industry.
Yet the brokerage underscores the hurdles for Starlink to achieve that. Low-earth orbit satellites lower latency compared with traditional geostationary networks, but they also bring technical complications.
The satellites move constantly, creating handover issues, and coverage is often wasted over low-population areas.
Satellite communication also requires a line of sight, which is harder to maintain in urban settings.
Service quality can be disrupted by adverse weather. Bernstein added that if Starlink were to build its own mobile base, “they might need to subsidise handsets… that could add significant costs on top of the charges Starlink would need to pay to use SpaceX’s spectrum.”
Despite the uncertainty, Bernstein reaffirmed its positive stance on Deutsche Telekom.
“Due to the significant hurdles to overcome (to become a credible challenger in US mobile) we expect Starlink to remain a partner rather than turn into a competitor to TMUS,” the analysts said.
The financial backdrop reinforces that view. Deutsche Telekom’s stock closed at €31.63 on Sept. 5, against a price target of €40, implying a 26% upside.
Reported earnings per share were €1.89 in 2024, with estimates of €1.99 in 2025 and €2.24 in 2026. The reported price-to-earnings ratio stood at 16.7x in 2024, with forecasts of 15.9x and 14.1x over the following two years.
The company carries a market capitalization of €149.2 billion, an enterprise value of €305.3 billion and a dividend yield of 3%. Performance has been mixed: up 5.3% year-to-date but down 10.7% over six months.
The stakes remain high. The initial market reaction underscored the perceived threat, but Deutsche Telekom’s exposure to U.S. mobile growth through T-Mobile, paired with the technical and financial barriers Starlink faces, suggests that for now the relationship between the two will remain more cooperative than competitive.