SpaceX’s satellite internet venture, Starlink, is having an impressively active month, after successfully launching another 60 satellites on 24 March, taking the total currently in orbit to more than 1,300.
With regulatory approval in the UK, Australia, Greece and Germany, the Washington-based US firm is now able to offer its services in a growing number of countries, in addition to the US and Canada.
Could the rapid pace of satellite installations, alongside its beta testing and the recently-opened customer pre-order window, be moving Starlink closer to the stability SpaceX CEO Elon Musk says the firm needs before it launches an initial public offering (IPO)?
Starlink's total satellites in orbit
What is Starlink?
Starlink is a satellite internet service launched by SpaceX, the space company founded by Elon Musk, to provide high-speed satellite internet access across the globe, in particular targeting rural and remote areas where there is currently little to no coverage.
Thousands of small, lightweight satellites are sent into the Earth's low orbit, creating a constellation network, which then works in tandem with ground transceivers.
At between 200 and 400 miles above Earth, the satellites are up to 60 times closer than traditional satellites, which should offer vast improvements compared with traditional satellite connection speeds. The development of the network began in 2015, with the first prototype satellites launched into orbit in 2018.
How is it going so far?
The latest Starlink launch is the fourth batch of 60 dispatched in March, meaning 240 satellites have been sent into orbit in just three weeks, reports techcrunch.com’s Darrell Etherington. For context, the second-largest commercial constellation operator, Planet Comms Asia [PLANET.BKK], has a similar number of satellites in space in total, says Etherington. SpaceX is on track to achieve its aim of launching 1,500 Starlink satellites in 2021, with its ultimate goal to add many thousands more active satellites into low-Earth orbit over the coming years.
The near-term goal is to continue expanding geographic coverage of its broadband internet service to more countries. SpaceX started a private beta service in the northwest US in August 2020 and a public beta service in October 2020.
Service is currently limited to “the northwest US, adjacent parts of Canada, parts of the UK and select other areas”, reports CNET’s Ry Crist, who adds that “the service now boasts more than 10,000 customers, and the coverage map will continue to grow as more satellites make their way into the constellation.”
Starlink is also taking pre-orders from customers interested in joining the company's beta program, which could take six months to fulfil.
Etherington reckons “customers seem to be having a positive experience with the network in terms of speed and reliability relative to other rural broadband solutions”, but adds, “the next big test will come once the network experiences a heavy load in terms of customer volume.”
“Customers seem to be having a positive experience with the network in terms of speed and reliability relative to other rural broadband solutions... the next big test will come once the network experiences a heavy load in terms of customer volume” - Darrell Etherington
What lies ahead for Starlink?
SpaceX hopes to have global coverage for Starlink over the next year or so. However, with the expansion of beta tests in the US and other countries, there are several key issues to consider, reports spacenews.com’s Jeff Foust.
These include establishing ground stations to serve as gateways, and the regulatory process, which varies from country to country and can be “very challenging”, SpaceX’s vice-president for Starlink, Jonathan Hofeller, said last week. Although Japan is an example of a country with a lengthy approval process, Hofeller predicts that Starlink’s service could begin in the country “as soon as the very end of this year.”
However, Starlink is likely to need at least 10,000 satellites in orbit to cover most of the world, and “right now, it's only about 10% of the way there at best”, argues Crist.
Musk, though, expects the service to reach global availability in 2022.
When will Starlink launch an IPO?
Musk says the eventual goal is to go public when Starlink has overcome the infrastructure investment phase, and once revenue has stabilised, tweeting on 9 February: “Once we can predict cash flow reasonably well, Starlink will IPO”. However, Musk has also tweeted that Starlink has to first overcome “a deep chasm of negative cash flow over the next year or so”. With analysts reckoning it could take until 2024 to achieve positive cash flow, investors may have to stay patient for a few years yet before Starlink launches an IPO.
“Once we can predict cash flow reasonably well, Starlink will IPO” - tweet from Elon Musk
SpaceX hopes that Starlink will generate $30bn in annual revenue, though Musk is aiming higher, at $50bn. Industry specialists, however, say it could take 3 million subscribers for the company to start paying for itself, as reported by Investment U’s Amber Deter. It’s undoubtedly a huge undertaking, with several risks and unknowns potentially obstructing Starlink’s path.
That said, the company has already made significant progress, which means Etherington is unlikely the only one striking a positive note: “Starlink could become a massive revenue driver for SpaceX once it’s fully operational.”
Disclaimer Past performance is not a reliable indicator of future results.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.