Starlink, the satellite internet division of SpaceX, has failed to meet the revenue projections made to investors in 2015 by about $10.6 billion annually. Internal documents reviewed by the WSJ reveal that Starlink generated $1.4 billion in revenue for 2022, significantly lower than the projected $12 billion in revenue and $7 billion in operating profit for the same year. The complexities of the satellite internet industry have presented challenges that Elon Musk may not have foreseen almost a decade ago.
SpaceX, as a privately held company, does not readily disclose its financial records, unlike Elon Musk’s publicly listed electric vehicle manufacturer, Tesla. However, with a recent valuation of $150 billion, investors in sectors such as telecommunications and space exploration are closely monitoring SpaceX, with expectations of it going public. Musk has stated that Starlink will have an initial public offering (IPO) once cash flow becomes reasonably predictable.
Despite its revenue, Starlink continues to operate at a loss, with SpaceX reporting a loss of $559 million against total revenue of $4.6 billion in 2022. In an interesting development, it was revealed that Musk borrowed $1 billion from SpaceX to fund his purchase of Twitter, which was later rebranded as X.
As of the end of 2022, Starlink had approximately 1 million active subscribers worldwide. A point of comparison, AT&T had over 70 million postpaid mobile internet subscribers in the U.S. alone during the first quarter of 2023.
The challenges faced by Starlink in achieving expected margins are numerous. They include difficulties in establishing a solid client base and securing steady sources of operating capital. While Starlink’s goal is to provide high-speed internet in remote areas globally, most internet users do not require this service. Additionally, the majority of people in the countries where Starlink operates reside in urban areas, where access to high-speed internet is usually more affordable than Starlink’s service fee.
Starlink currently offers its internet service in 60 countries, including North America, Europe, Australia, Japan, and select countries in South America, Africa, and Asia. Plans are also underway to launch in India soon. The company has explored opportunities in remote-access industries such as off-shore oil rigs and international shipping, but it is still primarily focused on end consumers. Starlink has partnered with third-party distributors, such as T-Mobile, and made its standard kit available at chain retailers like Home Depot to attract customers.
However, providing internet access to remote areas may not be as profitable as initially anticipated. Although Musk received praise when Starlink was made available in war-torn Ukraine, he later scaled back the assistance provided. Recently, Musk mentioned the use of Starlink services in war efforts.
In addition to its challenges, Starlink could face competition from Amazon, which is planning a network of low-Earth satellites under its Project Kuiper to provide internet access. SpaceX is currently the leading satellite launcher in the U.S., providing launch services to companies that are in direct competition with Starlink. Some of Starlink’s competitors, such as Viasat, Telesat, Geospace Technologies Corp, and Telstra Group Ltd, are publicly traded.
In summary, while Starlink’s revenue falls short of previous promises, it continues to navigate the complexities of the satellite internet industry. Challenges in finding a consistent client base and maintaining operating capital have contributed to its financial position. The pursuit of end consumers, partnerships with third-party distributors, and expansion into various countries are strategies aimed at increasing market share. However, competition from companies like Amazon and other satellite providers poses additional challenges for Starlink in the future.