The good and bad news about Sky and Space Global’s nano-satellite plan
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Perhaps it’s fitting that the highest flying tech stock on the ASX is a player in the global space race.
Since back-door listing in May last year, the share price of Perth-based nano-satellite provider Sky & Space Global (ASX:SAS) has dectupled and its market cap has risen from $25 million to over $300 million.
The company has an international aerospace pedigree – it was founded by experienced satellite experts from Israel and the UK.
After raising $5 million in December last year and another $10 million in May this year, it went on to achieve its biggest development milestone in June, launching its first three SAS3 Diamond nano-satellites via the Indian Space Research Organisation (ISRO).
Weighing less than 10 kilos and shorter than a human arm, these nano-satellites are the harbingers of a highly disruptive approach to mass communications.
Their launch represents the start of Sky and Space Global’s audacious $160 million project to create a constellation of 200 LEO (Low Earth Orbiting) satellites to deliver low-cost, high-speed communications to highly populous, low-income markets around the equator.
The simulation below shows SAS’s 2020 vision for a constellation of 200 satellites delivering narrowband service along the equator (full video):
SAS is an early mover in what will rapidly become a huge global communications market.
The potential for low-cost, high-coverage communications networks has opened up in just the last few years, because of reduced mass spacecraft, recyclable launch rockets and construction cycles much shorter than traditional GEO satellites (which are not stationary over Earth).
Launch technologies have also progressed. Earlier this year ISRO launched more than 100 nano-satellites in a single day from a high-tech polar launch vehicle.
The LEO networks will supply LTE (Long Term Evolution or 4G telephony) and hi-speed Wi-fi direct to customers.
The global LTE market is now worth almost $US400 billion.
This isn’t just a cost story; it’s about data. Global data generation is growing at more than 50 per cent.
In the next two years humans will generate more data than we have in our entire history. That data needs to be transmitted and this will further boost demand for LEO communications.
Sky and Space Global’s revenues will commence once its communications sub-systems become operational. It has already won a maiden customer in pan-African telco Sat-Space Africa.
SAS believes Sat-Space Africa alone could deliver satellite telephony revenues in excess of $30million.
The bad news
LEO boom has lured an array of powerful new entrants, funded by some of the wealthiest organisations and individuals on the planet.
Among those aiming to win a big slice of this emerging market is Elon Musk, the visionary founder of Paypal, Tesla, SolarCity and SpaceX, who aims to position 4000 satellites 1100km up in geostationary orbit to provide a global data network.
Japanese internet/telco giant Softbank is setting up constellation of 600 LEO satellites via its Oneweb subsidiary.
LEO is the reason Microsoft co-founder Paul Allen has just built the world’s biggest plane. The Stratolaunch, with six engines and 28 wheels, will soon start launching satellite-carrying rockets into space.
Much of Sky and Global’s satellites will be deployed by Richard Branson’s Virgin Galactic.
It remains to be seen what kind of market share Sky and Space Global can carve out for itself.
There are clearly some sizeable commercial challenges along the way.
But the company has somewhat valorously predicted it could deliver annual revenues of up to $1 billion once its 200 LEO network is fully operational in three to five years.
That would make the current market cap look very modest.
Tim Knapton is the founder and CEO of online tech research and finance marketplace TechVoyage. Its video/financial database and digital broadcast platform provide a more efficient way for investors to appraise listed and unlisted tech companies and for entrepreneurs to finance, acquire and exit them.
Previously Tim was Head of Corporate Broking at Deutsche Australia and before that ran a research department for a leading broking house. Tim has also been a freelance tech/finance journalist for more than 20 years and a columnist with The Australian Financial Review, The Bulletin, BRW, Shares and Australian Business.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.