Unlock Editor’s Digest for free
Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
Elon Musk wants to bring Starlink back to earth. Its communications company agreed last week to buy a portfolio of “low-band” spectrum ideal for broad mobile coverage, potentially putting it in more direct competition with traditional telecommunications giants. Even for someone as ambitious as Musk, that’s a challenge — and for his investors, the financing will be, too.
Starlink, a division of the $2 trillion SpaceX, already has a constellation of satellites capable of transmitting radio waves from space directly to a customer’s phone — ideal for someone on a remote mountain road, for example. But for regular cell service in a crowded city, it’s no match for the waves emitted by a nearby cell tower.
Musk’s new $8 billion spectrum package gives him access to such places, where users are both more numerous and, generally speaking, wealthier. But that will still require towers and antennas. To match the near-total coverage of the United States by companies such as AT&T, Verizon and T-Mobile, it could cost more than $110 billion in capital expenditures and take nearly a decade, Bernstein analysts estimate. The biggest players have invested a total of $600 billion each decade in modernizing their networks since the 1980s, MoffettNathanson analysts estimate.
On top of that, Starlink would need more spectrum. Its latest acquisition brings its assets to around 80 megahertz. That’s a fifth of what T-Mobile controls. Unlike satellites, spectrum cannot be mass-produced and put into orbit. It is limited, tightly regulated, and supply is only released periodically through regulatory auctions or private sales.
So why bother? Musk likes to solve difficult problems. Deploying wide mobile coverage may seem like child’s play compared to establishing colonies on Mars. Buying spectrum gives it option value, and the cost is small compared to the nearly $950 billion that analysts expect the company to invest, largely in AI data centers, by 2030, according to Visible Alpha.
He’s also someone who strongly believes in vertical integration: making chips as well as data centers and AI models at SpaceX; batteries as well as the cars and robots that work with them at Tesla. Autonomous cars and droids will have to talk to each other, exchange data, broadcast road images and follow instructions. Satellite signals, which have difficulty penetrating roofs and tree canopies, will not be enough on their own.
So buying spectrum can feel less like a bizarre side quest and more like part of a larger plan. The problem is that this means even more capital expenditure for a company that is already spending beyond its means. Analysts don’t expect SpaceX to post positive free cash flow until at least 2031.
Building a telecommunications network, whatever Elon Musk’s grand vision, would risk setting this project back even further. The SpaceX boss is good at doing difficult things, but perhaps the hardest part is knowing where to draw the line.
(email protected)
Gn bussni
