Satellites: “Unprecedented levels of change”

A note to investors from investment bank Exane/BNPP says the pace of change in the satellite industry is accelerating at unprecedented levels.

Specifically addressing the high-profile comments made at an event in Australia last week by billionaire entrepreneur Elon Musk, Exane says:  “Beyond the buzz around flying to Mars in 2022 or from New York to Paris in 30 minutes, the key point from his presentation was on the reduction in satellite launch costs enabled by its next generation rocket, the BFR. Capable of carrying a payload 15-times heavier than the current generation of rockets, Musk expects the marginal launch costs of the BFR to fall by a factor of 100. The BFR is due to fly from 2022.”

The note continues: “In our recent report linked below we argued that the pace of innovation in the satellite industry had accelerated to unprecedented levels. The latest Elon Musk announcement is a case in point. As launch costs account for 20 to 30 percent of total satellite capex, further reduction in launch costs are likely to drive normalised capex down. We upgrade Eutelsat on the back of a 30 percent cut in normalised capex and find support in our thesis in Space X new rocket plans.

“We also note that Eutelsat launched a new UHD channel [Travelxp 4K] on Hotbird yesterday providing support to our Video revenue thesis. We continue to buy Eutelsat which we prefer on SES and Inmarsat but expect all three stocks to see some short time benefits from Elon Musk recent declaration.”

The market has to wait to see how Musk’s ‘BFR’ translates into a potential variant to launching satellites and not getting people to Mars. However, few can doubt Musk’s determination and willingness to see his goal achieved.

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