BT (LSE: BT.A) shares took a dip last week with some potentially alarming news coming out of Elon Musk’s Space Exploration Company. Telecom stocks on both sides of the Atlantic dropped like stones after getting a fright that the eighth-largest company in the world (better known as SpaceX) could be out to eat everyone’s lunch.

What happened exactly? And is this real cause for alarm for BT? Or could the news simply be a chance to buy in even cheaper?

The problem

It’s important to point out that SpaceX currently runs Starlink, the internet service provided by a network of satellites constantly orbiting the Earth. So SpaceX is already a competitor of BT. But the difference, at present, is a large one.

BT has around 8m broadband subscriptions, which is 28% of the retail broadband market. SpaceX has just 100,000 UK customers, and those concentrated in rural and hard-to-reach areas. So what’s the problem?

Well, on 9 October, SpaceX agreed to acquire a portfolio of spectrum licences. This will pave the way for Starlink to provide mobile phone coverage in addition to its home internet service.

This could be a concern for existing providers like BT (which operates EE). SpaceX might have an advantage in providing service to ‘dead zones’ where signal is spotty. Although most mobile phone users are in cities – dense urban areas can be a struggle for Starlink’s satellites.

It should also be pointed out that the licensing deal is for the US only. The worry stems from Starlink spreading its wings and becoming a global player in the future.

A threat?

The reaction from the markets was significant. Share prices in US telecoms stocks took a battering. AT&T fell 6%, Verizon dipped 7%, and T-Mobile fell 7% too.

Stocks over here suffered a similar fate. Airtel Africa dropped around 5% and Vodafone close to 4%. BT was the least affected, down around 3% – likely due to mobile being a smaller part of the business compared to the others. All told, this is a sign that – in investors’ minds at least – SpaceX poses a genuine threat.

On the other hand, any competition is likely years away. And a couple of percent is small potatoes if we zoom out a little. The drop in the BT share price was only from 197p to 192p. This is the same share price that was 234p back in March. It was as low as 105p a couple of years ago!

On balance? The SpaceX news is something investors should be aware of, but I don’t think it comes anywhere near being the end of the world for BT shares. If the events turn out to be as unfruitful as some of Musk’s other grand promises, then this may even be a time to buy in a little cheaper. I think they’re worth considering.

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John Fieldsend owns shares in SpaceX.