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Bank: “Difficult to make Starlink work financially”

June 15, 2022

Technically, Elon Musk’s Starlink is working well. Musk’s generous supply of free Starlink terminals to fighters and military logistical technicians in Ukraine is both praiseworthy and a clear example as to how emergency supply of equipment can be managed. But making Starlink work for a global audience is a different – and major – problem, says an investment bank, adding that SES and Eutelsat offer solid alternatives.

In a report to clients from investment bank Exane/BNPP, analyst Sami Kassab cites the 500,000 subscribers using Starlink reported earlier in June and the business being on target to deliver the bank’s expectations to hit about 682,000 subs by year end.

Starlink in early June was already available in some 32 countries with other nations now being added on a near-monthly basis.

Starlink has launched 2,653 of its low Earth orbiting satellites of which 2,373 are “working” (as at June 13th) according to data from astrophysicist Jonathan McDowell.

Musk had been expected to mount an Initial Public Offering (IPO) around now, but in an email to staff last week Musk reportedly said that before any IPO Starlink needed to be “in a smooth sailing situation” with “good predictability”.

Back in 2019 Musk made a similar statement saying that Starlink would IPO once “we can predict cash flow reasonably well” and that “SpaceX needs to pass through a deep chasm of negative cash flow over the next year or so to make Starlink financially viable.” Musk also pointed out that “every new satellite constellation in history has gone bankrupt. We hope to be the first that does not.”

The bank says: “In our view, the recent announcement of a renewed delay in a Starlink IPO is likely to underpin the view that making a LEO constellation work from a technological aspect is one important thing, but making it work financially is a totally different matter.”

Kassab adds: “We believe that building an extended LEO constellation is like using a sledgehammer to crack a nut. With only 5 per cent of internet traffic latency critical and around 20 per cent latency sensitive, extensive LEO-only systems spend most of their time serving use cases that can be equally well-served served from less expensive MEO and GEO systems.”

The bank’s view is that existing ‘multi-orbit’ satellite strategies offer the best combination, noting: “SES (which the bank rates +) and Eutelsat (which the bank rates as ‘equal weight’ =) with its 23 per cent stake in OneWeb are the only players with such an infrastructure. Starlink might ultimately have to consider buying an incumbent operator to develop such a multi-orbit infrastructure and improve its economics.”

Meanwhile, SpaceX’s launch of its giant Starship rocket moves a step closer thanks to a batch of approvals from the Federal Aviation Authority (FAA) which has been inspecting certain aspects of SpaceX’s south Texas launch plans. The FAA has mandated 75 actions that SpaceX must carry out ahead of granting formal approval to fly any of the 120m tall Starship rockets.

The measures the FAA require include ongoing monitoring of vegetation and wildlife in the area around the Starship facility, which SpaceX calls its Starbase. SpaceX will also have to notify surrounding communities of potential engine noise and sonic booms from launches.

SpaceX will also have to provide more advance notice of launches to reduce the time that a public road passing alongside the launch facility is closed during launch operations. Road closures will not be permitted on 18 identified public holidays, and weekend restrictions will only be allowed five weekends per year, ensuring local residents can access the wildlife refuge and beach near the Starbase site.

Until these aspects are resolved and agreed to there is no licence.

Musk is funding the separate construction of a Starship launch site in Florida as an alternate – and probable main launch site – while the Boca Chica, Texas, facility is focused on R&D.

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