Does Starlink’s satellite broadband pose a threat to Indian telcos? What it means for sector? – Industry News

With Bharti Airtel and Reliance Jio announcing their respective agreements with SpaceX, JM Financial said that this tie-up is largely neutral for the two telecom companies and there seems to be no significant risk to growth potential for Indus Towers. Currently, the agreement between the two telcos and SpaceX is limited to distributing Starlink’s satellite broadband services via their extensive retail network, mostly to B2C and B2B customers in rural and remote areas, in return for some limited distribution income. However, per the report, Starlink, going forward, may also collaborate with telcos in the field of direct-to-cell satellite services as well.

“Given Starlink’s satellite internet use case is primarily for rural and remote regions, this agreement complements (and does not compete with) Bharti/Jio Fiber and AirFiber broadband business by expediting access to high speed internet even in the most challenging of locations. Further, this agreement with Starlink seems complementary to Bharti/Jio’s existing satellite broadband ventures (with Etuselat OneWeb for Bharti and with SES for Jio),” JM Financial said while adding that Starlink’s direct-to-cell satellite services are also unlikely to disrupt telcos’ key wireless business given its dependence on telcos, and inferior performance. 

Earlier last week, Bharti and Jio announced their respective agreements with SpaceX to offer: a) Starlink’s equipment through their extensive retail network; Jio will also provide support in customer service installation and activation; and b) Starlink services to business customers, connect communities, schools, health centres, etc. in even the most rural parts of India. Further, the agreement talks of exploring future collaborative opportunities in the satellite communication space. These agreements are subject to SpaceX receiving authorisation to sell Starlink’s services in India.

It is worth noting here that till very recently, Elon Musk’s Starlink was on one side while Reliance Jio and Bharti Airtel were on the other in terms of bringing their satellite broadband services in India and allocation of spectrum. All of this changed amidst the new geopolitical setup. 

Bharti Airtel and Jio tie up to help Starlink’s expansion in India

The two telcos – Bharti Airtel and Reliance Jio – have announced their respective agreements with SpaceX to bring Starlink’s broadband services to their customers in India. Under these agreements, JM Financial summarised, Bharti and Jio will explore offering: a) Starlink’s equipment through their extensive retail network; Jio will also provide support in customer service installation and activation; and b) Starlink services to business customers, connect communities, schools, health centres, etc. in even the most rural parts of India. “These agreements will help SpaceX to utilise and benefit from telcos’ ground network infrastructure and other capabilities in India. In turn, SpaceX has agreed to help Bharti and Jio expand and enhance their network and offerings. Further, according to the agreements, the companies will explore future collaborative opportunities in satellite communication space,” the brokerage firm said. 

How will Starlink benefit from Bharti/Jio extensive retail infrastructure

Before this, Starlink has already tied up with multiplace telcos in US (T-Mobile) and other countries (Rogers, Optus, One New Zealand, KDDI, Salt and Entel) to introduce and market its services quickly using their extensive retail infrastructure in new geographies. The company also enter into such agreements to get access to telcos’ 4G/LTE spectrum necessary to deliver direct-to cell satellite services as well. However, JM Financial said, “As of now, the agreement seems limited to Bharti/Jio distributing Starlink’s satellite broadband services via their extensive retail network, mostly to B2C and B2B customers in rural and remote areas, in return for some distribution income. However, in future, Starlink may also collaborate with Indian telcos in the field of direct to-cell satellite services as well.”

What’s in it for Jio and Bharti Airtel?

The partnership with Starlink will provide an additional revenue stream for Jio and Bharti in the form of sales commissions or mark-ups, along with some cross-selling opportunities. However, JM Financial said, direct contribution to their overall revenue is likely to remain limited. Separately, the two telecom majors also have their own satellite broadband ventures – Bharti-backed Eutelsat OneWeb and Jio’s JV with SES (Orbit Connect India), which are ahead of Starlink in terms of securing the licence from DoT and approvals from IN-SPACe. “We believe this agreement with Starlink could be complementary to their existing satellite broadband ventures given a) Starlink operates in both B2B and B2C segments while Eutelsat OneWeb and SES are limited to a few select industries in the B2B segment; b) huge data capacity advantage that Starlink has given it is the leading LEO constellation operator (with +6,400 LEO satellites; the next operator One Web has only ~650 LEO satellites). This will also help telcos position themselves as facilitators in bringing satellite connectivity to a wider customer base in India,” the analysis report maintained. 

Any major threat to telcos’ home broadband business?

Given its higher pricing and limited speed, Starlink’s satellite broadband services pose a limited threat to telcos’ home broadband business. “Starlink (and other satcom companies) have globally priced satellite internet plans at $10-500 per month excluding one-time cost for hardware (which is ~$250-380). This is 7-18 times more expensive than Indian telcos’ home broadband plans (i.e., FTTH/FWA) that start from $5-7/month, while the higher end plans cost upto $47/month and provide speed of upto 1gbps and access to all OTT apps,” JM Financial said. Further, Starlink offers plans with data caps and limited speed while Jio and Bharti provide unlimited data and higher speed. Hence, pricing remains a challenge for Starlink to become competitive in the price-conscious Indian market.

Moreover, given its dependence on telcos, and inferior performance, Starlink’s direct-to-cell satellite broadband services are unlikely to disrupt telcos’ key wireless business.

Starlink was the first mover in testing and developing direct-to-cell technology, which can facilitate provision of satellite broadband services directly to cell phones. It rolled out pilots that support only text messages in late CY24 while voice, data and IoT services are slated to begin in CY25. However, per JM Financial report, this technology is still at a nascent stage and is currently facing technical constraints: a) LEO satellites are not stationary relative to the Earth; hence, circumventing this via beam steering is difficult in case of cell phones; and b) cell phones’ low antenna gain and power limits their capacity to maintain a reliable line of communication with the satellites. Hence, Starlink (and other satellite players) require tie-ups with telcos to get access to their compatible 4G/LTE spectrum to connect with smartphones. 

Also, the tie-ups should enable satellite players to authenticate and connect users via SIM cards. Such dependence on telcos’ infrastructure could potentially act as a strong barrier for Starlink to independently disrupt the mobile wireless segment in India, JM Financial concluded.

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