Mobile operator Verizon (NYSE: VZ) has seen its shares sell off in the wake of the SpaceX (NASDAQ: SPCX) IPO, lifting Verizon’s dividend yield to 6.7%.
The sell-off looks overdone in my view, making the stock an attractive buy at current levels
Investors worry that SpaceX will use its leadership in satellite internet to challenge traditional mobile carriers like Verizon. However, there are multiple hurdles to this happening. Two of the biggest are technology constraints and regulatory issues.
A look at the potential threat Cellular networks, like Verizon’s, use dense, localized cell towers and small cell antennas that reuse spectrum thousands of times within a single city. Low-earth-orbit (LEO) satellites like those SpaceX deploys, on the other hand, project massive beams over large areas. If millions of people in a dense city or suburb tried to stream video via direct-to-cell satellite at the same time, capacity would collapse.