The entry of Starlink—the satellite internet service offered by Elon Musk's SpaceX—is not expected to hit domestic telecom firms which provide broadband connectivity, according to Jefferies.
Starlink is unlikely to be disruptive for the local telecom firms due to "capacity constraints", which will necessitate premium pricing, the financial services firm explained in a note on Thursday.
Jefferies pointed out that Starlink has priced its services at two-to-three times the rate levied by local telecom companies, in both high-income countries like the United States and low-income markets such as Kenya and Nigeria. The higher pricing may hit its prospects in a rate-sensitive market like India.
Another reason behind Starlink unlikely to be disruptive is its reliance on local telecom players. "It needs telco tie-ups for distribution/installation and backhaul," Jefferies noted.
Also, the government seems to be inclined to balance the interests of telecom and satellite operators, "rather than accepting everything that satcom players have asked for", it added.
Jefferies further highlighted that the home broadband segment—the key target market of Starlink—forms an estimated 8-9% of Jio's revenues and 4% of Bharti Airtel's India revenues-ex tower. "Hence, Starlink's entry in this segment is unlikely to impact the fortunes of Indian telcos significantly," the note stated.
India A Key Market
Despite the challenges, India remains a crucial market for Starlink, Jefferies explained. SpaceX may initially be able to serve only 18 lakh users in India, but the same can rise to 57 lakh by 2030, Jefferies said, citing its analysis. This would be higher than Starlink's present subscriber base of 46 lakh.
With Starlink not having access to the top two countries by area— Russia and China—other large countries such as India have "become more important" for the satcom player, the note stated.
Jefferies, however, noted that even though Starlink's estimated addressable market of 57 lakh in India is significant, it remains lower as compared to the size of India's fixed-line broadband market which can grow to 9-10 crore users over the next few years.
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