Citi: Tower Stocks Poised to Gain from Potential Starlink Mobile Network

A potential move by SpaceX's Starlink to build its own full-service mobile network would be a "net positive" for large-cap tower stocks, according to a new analysis from Citi. Such a development would introduce a major new customer for tower leasing, boosting a sector that has recently seen a pullback in stock prices.

The Tower Thesis

Citi analysts expressed a continued positive outlook on tower operators American Tower (AMT), Crown Castle (CCI), and SBA Communications (SBAC). The firm believes these companies are well-positioned to benefit from several constructive long-term trends, including:

• Stabilizing organic leasing activity
• Growing consumer data consumption
• Upcoming spectrum auctions
• Ongoing 5G densification

The potential entry of Starlink, or another low Earth orbit (LEO) satellite constellation, as a network builder would serve as a powerful additional growth driver, providing a new source of significant leasing revenue for physical tower infrastructure.

A Threat to Telecom Incumbents

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Conversely, the same scenario presents a "net risk" to established wireless carriers like AT&T (T), Verizon (VZ), and T-Mobile (TMUS), the report states. Citi noted that telecom stocks are currently trading on the risk of the competitive landscape expanding from approximately 3.5 average players per market to between 3.5 and 4.5.

The firm views Mobile Virtual Network Operator (MVNO) agreements between Starlink and the major carriers as unlikely. However, it would not dismiss the possibility of SpaceX pursuing an acquisition and merger with an existing telecom provider to accelerate its market entry.

Data Center Demand Remains Strong

Beyond towers, Citi's report highlighted positive indicators for the data center sector, with strong demand from both hyperscale and retail clients. The firm sees the enterprise adoption of Artificial Intelligence (AI) as being in its early stages, suggesting a long runway for growth.

Analysts maintain Buy ratings on key data center players Equinix (EQIX) and Digital Realty (DLR). While demand is robust, supply growth in several key markets remains constrained by power availability and community opposition to new developments, which could support pricing trends.