Deutsche Telekom's Höttges dares Musk to spend $223bn on telecoms

Elon Musk will need at least €200 billion ($223 billion) — and probably more — if SpaceX wants to become a genuine mobile network operator, according to Deutsche Telekom CEO Tim Höttges. He delivered the estimate on Deutsche Telekom's earnings call this week, responding directly to Musk's stated ambition to compete with the "Big Three" US carriers: AT&T, T-Mobile and Verizon.

Höttges, whose company is the majority investor in T-Mobile US, made clear he regards the threat as real rather than rhetorical. "If he wants to play in the telecommunication business or in the connectivity business, he needs terrestrial service, no question. And by the way, I take his attempt seriously," he said.

What does Höttges think SpaceX is missing?

His argument rests on spectrum. SpaceX recently struck a deal for Grain Management's nationwide 800MHz spectrum portfolio, giving it 76MHz of holdings. Deutsche Telekom, by contrast, controls 400MHz. That gap frames the scale of the catch-up Musk faces.

"He has now bought 76MHz of spectrum. By the way, we have 400. So if you now say, okay, he can buy the spectrum prospectively, do your math. These are kind of triple-digit millions, or billions, which are needed to gain the spectrum position," Höttges said. "Okay. If he has the money, go for it. Then he has to build a network."

The network itself would demand towers in large numbers, along with tower rental costs, antennas and deployment of equipment. Höttges put the total bill at a minimum of €200 billion ($223 billion), and possibly beyond that, to enter "an industry which we have professionalized over the last 20 years. Okay. Welcome to the party."

He also repeated a view widely held across the telecoms sector: satellite connectivity complements rather than replaces terrestrial service, particularly indoors.

How is SpaceX building toward a terrestrial play?

The company is constructing a satellite network centred on direct-to-device (D2D) connectivity, targeting hard-to-reach spots that traditional telecoms infrastructure does not or cannot cover. But recent moves point to ambitions well beyond satellites.

This week, SpaceX signed a multi-year 5G infrastructure agreement with Qualcomm, under which the chip designer will supply radio equipment, baseband units and software. Two weeks earlier, reports emerged that SpaceX was in talks to access 80,000 cell sites across the US to build out its network.

Musk's carrier ambitions have drawn comment from every US mobile operator in recent weeks. T-Mobile CTO John Saw has already cautioned Musk and SpaceX that building a network takes more than spectrum alone.

How is Deutsche Telekom itself performing?

The bravado on the call came backed by solid numbers. Deutsche Telekom reported third-quarter revenue of €31.1 billion ($34.9 billion), up 7.5 percent, with service revenue rising 6.1 percent year-over-year to €26 billion ($29.2 billion).

Adjusted net profit climbed 12.7 percent to €3 billion ($3.4 billion) in the period. Across the company's European units, DT grew its mobile subscriber base to 126.2 million, while fixed network lines across its European markets slipped 0.2 percent to 25.6 million.

The coming months will show whether Musk commits the capital Höttges says the market demands, with the Qualcomm agreement and the reported cell-site negotiations the first concrete steps toward a terrestrial footprint.