Direct-to-cell satcom tech unlikely to disrupt terrestrial telco business

T-Mobile, Starlink to launch satellite-based connectivity, initially in the US, by mid-2025

Even if Starlink picks an Indian telecom operator to provide direct-to-cell satellite coverage on mobiles, the service will likely only complement traditional telecom networks in the near term, given the pricing pressures of satellite communication (sitcom), analysts say.

 

Starlink's partnership with T-Mobile to provide direct-to-cell satellite coverage on mobiles, initially in remote locations in the US, will begin by mid-2025, an analyst note by Bernstein pointed out on Thursday. It said Starlink is offering telcos using its direct-to-cell capability the chance to enjoy reciprocal global access in partner nations.

 

Separate deals with Starlink announced by telecom operators Bharti Airtel and Jio earlier this week primarily cover the distribution of Starlink equipment and services in India for Airtel and Jio customers, but have kept options open on further collaboration. They call for exploring how Starlink services can expand and enhance Airtel's existing network, and evaluate complementary areas of cooperation to leverage Jio and Starlink's infrastructure.

 

"Starlink’s direct-to-cell service is more likely to complement traditional telecom networks like Reliance and Bharti Airtel in the near term rather than fully replace them. While Starlink direct-to-cell offers unique capabilities, its high costs, regulatory challenges, and niche focus limit its ability to threaten Reliance Jio or Bharti Airtel’s core markets in India," Bernstein said.

 

The network provides ubiquitous connectivity by eliminating traditional mobile dead zones through satellite-to-mobile technology. "It works with existing LTE (Long Term Evolution) phones wherever users can see sky. There are no changes to hardware, firmware, or special apps required. Compared to terrestrial networks, which rely on cell towers, Starlink direct-to-cell uses specially designed satellites that function as cell towers in space to expand terrestrial coverage into otherwise unreached areas," Bank of America Research (BoA Research) said in another note.

 

In this case, Starlink satellites will use telco partners’ spectrum to operate the service over their respective countries. One year after the first direct-to-cell-enabled satellites were launched into orbit, the Starlink direct-to-cell messaging service is now live in the US and New Zealand.

 

Starlink provides satcom services in over a 100 countries through a constellation of over 7,000 low earth orbit (LEO) satellites operated by SpaceX, the American spacecraft manufacturer, launch service provider and satcom company owned by US tech billionaire Elon Musk.

 

In most of these markets, it has teamed up with telco partners, such as Optus (Australia), Rogers (Canada), KDDI (Japan), One-NZ (New Zealand), Salt (Switzerland), and Entel (Chile and Peru). But it is yet to become a significant market force in any of these.

 

Pricing pressure

 

Analysts maintained that it is difficult to understand the unit economics for this business unless pricing is clear. Currently, customer premises cost of Starlink services is high at upwards of $180 per month. Bernstein expects Starlink's annual corporate tariff plan to cost ₹2.15 lakh while the same is ₹15,146 for higher-end plans of Jio and Airtel currently. Considering the price is 10-14 times higher than other major broadband providers in India, analysts believe it would be difficult to provide services to the target rural markets, without government subsidies. Starlink pricing remains 9-175 per cent higher than local broadband operators in key Asian markets such as Singapore, Indonesia, Malaysia, and Philippines, excluding the higher upfront costs.

 

"While Starlink can offer speeds up to 200-250 Mbps, over time capacity could be an issue as that is limited by number of satellites hovering around India. This may limit the target home market in near term. Currently, we consider satellite broadband offering to be niche as we note 5G & FWA (fixed wireless access) penetration is strong in India," BoA Research said.

 

However, when Starlink launched its services in Kenya, they offered pricing as low as $10 in Kenya and $50 in Eswatini. "When compared to the leading ISP monthly price packs, in at least five of the 16 African countries where the service is available, a monthly Starlink subscription is cheaper than that of leading fixed internet service providers. The subscription cost does not include upfront cost of Starlink hardware, which ranges in price/availability from $178 for a Starlink Mini in Kenya to $381 for a Standard Actuated kit in Nigeria," BoA Research said.

 

Also, as the technology matures, the economics of the satellite business may change, analysts have pointed out. This may be led by cost of installing a satellite coming down drastically to $3-4 million, from $7-8 million, improving throughput, and the average life of LEO satellites expanding from the current four years. Globally, Starlink has about 5 million subscribers as of March.   

ANALYSTS’ VIEWS 

 

BERNSTEIN

 

- While Starlink direct-to-celloffers unique capabilities, its high costs, regulatory challenges, and niche focus limit its ability to threaten Reliance Jio or Bharti Airtel’s core markets in India

 

- We expect Starlink's annual corporate tariff plan will cost ₹2.15 lakh while the same is 15,146 for higher-end plans of Jio and Airtel currently

 

 BANK OF AMERICA RESEARCH

 

- Compared to terrestrial networks which rely on cell towers, Starlink direct-to-cell uses specially designed satellites that function as cell towers in space to expand terrestrial coverage into otherwise unreached areas

 

- While Starlink can offer speeds upto 200-250 Mbps, over time capacity could be an issue as that is limited by no. of satellites hovering around India