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As President Donald Trump’s favourite tech billionaire reliance on Starlink, Starlink, the satellite system for satellites, Blowback on Elon Musk sets rockets on fire under Europe’s besieged space sector.
In Italy, a $1.5 billion contract proposed for secure military communications with Starlink has been opposed. Canada’s Ontario is already ripping a $100 million deal. In Ukraine, the European government is concerned that the campaign’s warfare crucial boards, battlefield communication and drone connectivity, relies on Starlink, and is in discussion with four large satellite operators about providing backup.
Two of these are Luxembourg’s SES and French satellite operator Eutelsat. The latter stock was effectively quadrupled from its low base last week, while Luxembourg’s SES rose by a quarter.
As things stood, the pair were in a tight spot. While legacy satellite operators will need to combat the rise of new communication services from low Earth orbit, traditional cash cows such as satellite broadcasting (which account for half of Eutelsat’s revenue) are facing a structural decline.
Building and maintaining satellite constellations is expensive. Eutelsat has won 2 billion euros of 2.2 billion euros for low-earth orbital satellites by 2029. That balance sheet has already grown. Net debt was nearly four times the annual adjusted EBITDA and was opposed to the contract before these were extended.
That’s bad enough. But it also faces a formidable competition at Starlink, beating it in terms of capabilities, coverage and technology. This is a global business by definition, with Starlink operating in 120 countries. This means that anterograde satellites are more likely to operate at more times.
Virtually a vertically integrated group, Starlink reduced costs, produced its own kits, and launched satellites into space thanks to Musk’s SpaceX. The same holds true for Amazon’s Kuiper, which launched this year and has far more capacity than Eutelsat’s low orbit operation, OneWeb.
If we make revenue, eutelsat will fall into positive free cash flow territory next year. Despite the small fleet of satellites, eutelstat has sagging. Bernstein estimates that capacity utilization is running at just 15-20%. If the Italian contract switches to Eutelsat and Musk doesn’t underestimate it, it would be about half the group’s provisional distance, adding $300 million in revenue per year.
Concerns about Starlink speed up existing trends towards more home-made European satellite spending. Eutelsat is part of a consortium already working on IRIS², a 6 billion euro project funded by the EU and scheduled to be served in 2030.
Of course, it’s time that money doesn’t buy. Even if the money isn’t turned into a pony tomorrow, users will still need a terminal on the ground and additional satellite orders will need to bid. Still, as the problems progress, these are the most amazing Eutersatts I’ve had for a very long time.
louise.lucas@ft.com
