Elon Musk’s company SpaceX plans to launch a new mobile service Starlink for consumers in the US, which could transform the country’s multi-billion dollar telephone network market.
During a recent roadshow ahead of the initial public offering (IPO), the company’s President and Chief Operating Officer Gwynne Shotwell informed investors that the group is considering launching a retail product called Starlink and may develop its own terrestrial mobile network in the US. This information was provided by four people familiar with the situation.
This initiative would require Starlink to create a new retail offering by selling mobile contracts to individual customers, directly competing with the three major network operators in the US: Verizon Wireless, AT&T, and T-Mobile.
So far, SpaceX has offered limited services to consumers in the US, providing telecommunications companies like T-Mobile with access to its satellites to enhance their existing network coverage in rural areas. Although the commercial terms of Starlink agreements are not disclosed, analysts believe that the company receives a share of the revenue generated from customers whose mobile contracts include access to its satellites.
Significant expansion and IPO
SpaceX’s move into retail contracts would mark one of the most significant commercial expansions since the launch of Starlink, which is already operating in over 150 countries worldwide, providing high-speed internet through its satellite network. A direct mobile offering for consumers would give SpaceX access to a much larger market than just satellite broadband, potentially reducing its reliance on telecommunications partners who currently serve as intermediaries between Starlink satellites and end users.
These plans surfaced just days after SpaceX’s landmark initial public offering, which heightened investor expectations for the company to sustain its rapid growth and explore new revenue sources. During the IPO roadshow, Elon Musk presented investors with future plans to establish data processing centers in space and build a colony on Mars. Analysts at Goldman, the lead underwriter for SpaceX, projected a 100-fold increase in the company’s revenue from artificial intelligence to $322 billion by 2030.
While SpaceX has described the expansion of Starlink as a key growth pillar in its IPO prospectus, the company has not publicly confirmed plans to launch a retail mobile service. Speculation about SpaceX‘s future mobile initiatives has circulated for months, particularly after the company paid $17 billion to competitor EchoStar in September of last year for wireless spectrum licenses to enhance its Starlink satellite network. Many analysts viewed this deal as laying the groundwork for a potential retail offering.
Analysts’ ambitions and cautions
In its bond offering prospectus, reviewed by the FT, SpaceX noted that while it expects the Starlink Mobile service to currently “be most effective for customers in remote areas not covered by terrestrial mobile networks”, its long-term ambitions are broader. The prospectus suggests that as performance improves and the satellite network expands, the company “will compete to be the best connectivity experience for our customers regardless of their location, whether rural, suburban, or urban areas”.
The launch of a consumer mobile retail service Starlink would also complement the company’s existing broadband internet option, which served 10.3 million customers worldwide as of March.
However, these plans have raised concerns among analysts, who warned that the initiative might merely be a strategy to negotiate better deals with Starlink‘s telecommunications partners. They cautioned about the billions of dollars in costs associated with constructing and acquiring radio wave spectrum needed to deploy mobile networks.
New Street Research estimates that the three US mobile network operators hold a total of about 1,020 MHz of spectrum, while SpaceX possesses only 65 MHz.
David Barden, a partner at New Street Research, stated that building “a wireless network in saturated markets around the world would be incredibly difficult”. He added: “But as a starting point for negotiations for the best possible revenue-sharing deal with mobile network operator partners? That makes a lot of sense.”
Source: Ars Technica