Elon Musk wants to bring Starlink down to earth. His communications company last week agreed to buy a portfolio of "low-band" spectrum ideal for broad mobile coverage, potentially putting it in more direct competition with regular telecoms giants. Even for someone as ambitious as Musk, this is a challenge, and for his investors, funding it will be too.
Starlink, a division of the $2tn Space X, already has a constellation of satellites that can beam radio waves from space straight to a customer's phone, ideal for someone on a remote mountain road. But for regular mobile service in a crowded city, it is no match for waves beamed from a nearby cell tower. Musk's new $8bn bundle of spectrum gives him a toehold in such places, where users are both more numerous and, generally speaking, richer. That will still require towers and antennas. Matching the near-total US coverage of AT&T, Verizon and T-Mobile could cost more than $110bn in capital expenditure and take almost a decade, Bernstein analysts calculate.
Starlink would also need more spectrum. Its latest acquisition brings its holdings to about 80 megahertz, a fifth of what T-Mobile controls. Unlike satellites, spectrum cannot be mass-produced and launched into orbit. It is finite, tightly regulated and released only periodically through auctions or private sales.
So why bother? Musk likes solving hard problems, and the cost is small compared with the almost $950bn analysts expect the company to invest by 2030, much of it on AI data centres. Self-driving cars and robots will need to talk to each other, and satellite signals alone won't suffice. Buying spectrum may therefore be part of a bigger plan. The problem is that it adds to capital expenditure at a company already spending beyond its means. Analysts don't expect Space X to be free cash flow positive until at least 2031.
Source: Financial Times Companies · Summarized by HeadlinesBriefing