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Analyst: Starlink ‘cash flow breakeven’ by 2023?

October 3, 2022

A report from TMF Associates and CEO Tim Farrar is blunt, and rare amongst analysts in admitting he has now changed his mind about SpaceX’s prospects. Until 2020, TMF was sceptical about any of the many LEO broadband-by-satellite operations.

TMF’s analysis was justified in that LeoSat failed in late 2019, OneWeb hit bankruptcy in March 2020, and even SpaceX’s Starlink had uttered what TMF described as “widely over-ambitious forecasts” of reaching $6 billion in revenues last year and reaching $30 billion by 2025.

TMF admits that Musk’s Starlink has launched broadband services and “provided vastly more capacity per subscriber than Viasat and Hughes”. TMF quotes the 400,000 subs on Starlinks books by June 2022. We now know that they have achieved 700,000 subs.

“Successfully developing such a system is an extraordinary technical feat when so many previous broadband constellation plans have failed. And after raising over $6 billion in the last 2.5 years at ever increasing valuations, SpaceX has been able to launch thousands of Starlink satellites and build scale that competitors will struggle to match,” says TMF.

Starlink is still being treated as if it will not damage other parts of the satellite market, says TMF.

“However, the dam is starting to break for acceptance of Starlink amongst professional users, with Royal Caribbean’s recent move to deploy Starlink representing just the start of disruption in traditional satellite verticals. And SpaceX’s latest $2 billion in equity funding should see the company through to late 2023, by which time I expect Starlink to have captured around 1 million users and have reached cash flow breakeven (even accounting for ongoing satellite replenishment costs),” states TMF.

Tim Farrar believes that Starlink can now tap into a virtuous circle, and where more satellites mean more capacity, speedier sky-scanning for users and thus lower power levels for user terminals.

“We’re in a position where Starlink has clearly won the race for LEO broadband (at least for the next 4-5 years, since Amazon’s Kuiper won’t be completed before 2026-27), and is likely to become the largest satellite operator by revenue within that timeframe,” says TMF.

But the analysts warn that while Starlink, helped by Musk’s billions, might well dominate for the next few years it can also prompt industry consolidation, and potentially bankruptcies for the unsuccessful.

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