Is Telstra prepping for a space war with Elon Musk’s Starlink?
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It looks as though Elon Musk’s Starlink satellite internet service might have a new competitor.
Telstra (ASX:TLS) is getting into the satellite game. Sort of.
Viasat, a global satellite broadband internet company, is coming to Australia. Once Telstra is done laying the groundwork. You may remember Viasat from Qantas domestic flights, to which it provides high-speed internet connectivity with full video streaming.
The telco announced Wednesday that it would be laying the ground infrastructure and fibre network to support Viasat Down Under, in a 16.5 year contract spanning the approximate operational lifetime of the satellite, which is expected to go live in Australia by 2023. Which means Starlink, which recently exited beta-testing phase, and is available in parts of NSW, Victoria, South Australia, and Western Australia, has about a two year lead on Telstra/Viasat in the broadband space race.
The Telstra project will support one of three “ultra-high-capacity Viasat-3 satellites which will cover the visible earth,” according to a Viasat spokesperson, starting with the Americas, whose satellite will launch later in 2022, followed by Europe, the Middle East, and Africa (EMEA) in 2023.
The third satellite, which will provide service to the APAC region – including Australia – will be ready to ship to its launch provider six months after the EMEA satellite, (though Telstra is only supporting the Australian arm of the project). The Viasat satellite will offer more than 1Tbps of total network capacity in Australia, delivering data and video streaming speeds of more than 150Mbps.
The telco plans to install Viasat’s satellite access node (SAN) equipment at hundreds of sites across Australia, laying new high-speed fibre links to each site, which will then connect to multiple redundant data centres which will house the core networking equipment required to manage the expected increase in data traffic.
While Telstra says it has no plans to offer a retail product/service at this stage, Viasat was blunt about its intentions to compete with Starlink.
“Our satellite service competes with Starlink today in other markets; we expect to compete with Starlink in Australia,” said Peter Girvan, vice president of Space & Commercial Networks at Viasat Australia.
“We expect our service to offer better bandwidth economics — as it offers more cost-effective bandwidth to serve a more diverse set of markets. We believe we can best serve our existing and future target customers with a multi-orbit, multi-spectrum and hybrid space/terrestrial architecture that delivers a better overall customer experience than NGSO/low earth orbit (LEO) satellites alone.”
Given that Starlink speeds are already faster than the maximum speeds offered by NBN providers on their fixed-line 100 plans – particularly for those outside the major metropolitan regions – and up to six times faster than NBN satellite, Telstra and Viasat have their work cut out for them.
Once the Viasat-3 (APAC) satellite has launched, Viasat said it plans to expand its vertical market reach to include enterprise, residential, government, defence and mobility (e.g. aviation and maritime) customers. As to how many households will be able to access Viasat once the project is completed, its “customer mix (by geography and vertical) will ultimately determine the number and type of each customer we can support and where”.
While Viasat has not yet announced its ‘go-to-market’ model across the region, it says that its service plans are typically announced approximately three to six months after a satellite is launched, which, as we mentioned, will likely be in 2023.
Starlink could not be reached for comment. (But we’re still trying.)
As we previously mentioned, Musk’s Starlink has a running start on Viasat. Until recently, Starlink’s operating licence only allowed it to provide service in “low and remote density areas” of Australia, but on July 14 2021, it was granted two new licences by ACMA, authorising it to sell its services Australia-wide.
Anyone in Australia can now place an order with Starlink, unless you live within a 70km radius of the Murchison Radioastronomy Observatory in WA, the home of Australia’s Square Kilometre Array. However, as it is a first-come-first-served operation at Starlink, there is no guarantee that applications will be approved.
Starlink advertises that its satellite internet service is capable of speeds between 50-150Mbps, and at least one customer interviewed by the ABC last year reported consistent speeds between 150-250Mbps. Make of that what you will.
While Musk claimed (in a tweet, naturally) that speeds may double to 300Mbps by the end of 2021, it seems, from the radio silence, this has yet to eventuate. (Elon, if you’re reading this, we welcome a response).
Speed will double to ~300Mb/s & latency will drop to ~20ms later this year
— Elon Musk (@elonmusk) February 22, 2021
Telstra CEO Andrew Penn said the Viasat build is the largest-scale satellite solution deployment in the nation’s history.
“It’s a clear demonstration of the potential opportunities we have when we combine Telstra Enterprise’s customer management and service capabilities with Telstra InfraCo’s industry leading existing infrastructure assets and new build capabilities,” he said.
Dave Ryan, President of Viasat’s Space and Commercial Networks, described Telstra as a trusted, well-respected organisation with impressive infrastructure assets in Asia and an extensive fibre network.
“By leveraging their existing infrastructure for our ground network, we can cost-effectively optimise our satellite assets and significantly lower our risk of deployment and operations for the Viasat-3 terabit-class satellite system,” he said.
“We remain focussed on delivering advanced connectivity – from mobility and government services to connecting hard-to-reach communities – across the region.”
The Viasat drop was one of two announcements made by the telecommunications company at market open on Wednesday.
Telstra also announced its intention to increase its fibre-optic capacity by building 20,000 route kilometres of “state-of-the-art inter-city dual-fibre paths” enabling ultrafast connectivity between capital cities and improved regional connectivity, including opportunities for higher capacity mobile backhaul.
Though Telstra declined to provide a breakdown in capital allocation, the combined investment in both projects is expected to cost between $1.4-$1.6 billion outside of its BAU capex envelope over the next five years. It expects to invest up to 70 per cent of this total commitment across its T25 planning period, or an additional ~$350 million of capex per year over FY23 to FY25 and expects cashflow to remain ahead of accounting earnings.
Its capex, including the Viasat and National Fibre Network projects, is projected to be $250 million per annum lower than adjusted depreciation and amortisation.
Telstra says both projects meet its organic investment criteria and are consistent with its capital management framework, including a commitment to balance sheet settings consistent with an A band credit rating.
“Telstra expects these investments combined to deliver mid-teens IRR, to reach per annum EBITDA contribution of around $200 million by FY26, and to have a payback period of approximately nine years. There is no change to FY22 guidance, and Telstra plans to complete its on-market buyback in FY22 as previously advised. It also remains committed to deliver all of its T25 financial ambitions.”
Telstra’s share price dipped briefly following the announcement, then rose to $4.00 by lunch, an increase of 1%, up from $3.96 at open, and held steady for most of the afternoon before closing at $3.98, an overall increase of 0.71%.