SpaceX’s Starship sits unstacked from its booster on the launchpad at Starbase in Boca Chica, Texas, in 2023.<\/p>\n
AFP via Getty Images<\/p>\n
With two-thirds of the satellites currently in low-Earth orbit, SpaceX has become the king of the heavens, overseeing a growing broadband internet empire on the ground. But when it comes to the nascent business of using satellites to connect to mobile phones in remote areas beyond the reach of telecom towers, SpaceX has been far more constrained. So far, it\u2019s been working with a narrow band of T-Mobile\u2019s cellular spectrum in the U.S., only able to relay text messages.<\/p>\n
Billionaire Elon Musk\u2019s company took a step to break out in a big way Monday, announcing the purchase of a long-coveted chunk of spectrum from EchoStar that\u2019s perfect for beaming signals to mobile phones from space. The hefty price tag, $17 billion, makes it SpaceX\u2019s largest acquisition by far. The company touted<\/a> that the spectrum it\u2019s buying will allow it to field new satellites that provide 20 times the throughput and full 5G phone service \u2013 complete with video calls from on top of any scenic mountain you want to climb.<\/p>\n But those promises come with a caveat: those new satellites appear to be designed to be launched by the giant rocket it\u2019s developing, Starship. If Starship doesn\u2019t work as promised, that would be a giant monkey wrench, said Caleb Henry, an analyst with Quilty Space. SpaceX\u2019s direct-to-cell plans are \u201cdependent on Starship,\u201d he said.<\/p>\n Though its most recent test flight went well, breaking a streak of three straight that ended with spectacular explosions, questions still abound as to the soundness of Starship\u2019s design<\/a> and whether it can deliver the drastic reduction in launch costs Musk has promised.<\/p>\n The rocket is designed to carry 100 tons of payload to low-Earth orbit, more than four times as much as SpaceX\u2019s workhorse Falcon 9. To take advantage of that, SpaceX has built a larger, more powerful next-generation broadband satellite that\u2019s too large to be launched in meaningful numbers by Falcon 9. The company is most likely doing the same with the next version of its direct-to-cell satellites to provide better service, said Henry.<\/p>\n \u201cWhen you want to close a link with a weak antenna in a phone, you have to make the satellite a lot more powerful,\u201d he said.<\/p>\n SpaceX put 655 of its first generation of direct-to-cell satellites into orbit on Falcon 9, but it halted launches in June and is now waiting on Starship.<\/p>\n Musk is promising that the rocket\u2019s huge payload capacity, plus making it fully reusable, will also allow SpaceX to radically decrease launch costs, allowing it to build out service at an affordable price to customers. Proving out reusability remains contingent on the rocket not blowing up on a regular basis. But SpaceX also needs to show that Starship can actually haul 100 tons to low-Earth orbit, said Henry. The latest version it\u2019s tested is only designed to carry 35 tons<\/a>.<\/p>\n The deal itself isn\u2019t as big a lift for SpaceX, even though $17 billion may look like a big chunk of change for a company that Musk claims is headed for $15.5 billion in revenue this year. It could fetch $4 billion to $5 billion from leasing the spectrum for terrestrial use by cellular companies, said Philip Burnett, a telecom analyst at New Street Research. And the $8.5 billion in stock that\u2019s part of the deal is essentially \u201cfree\u201d given the enthusiasm of investors for the company. SpaceX is reportedly in the middle of raising capital<\/a> at a $400 billion valuation, and it wouldn\u2019t have problems tapping the debt markets to finance the deal, said Burnett.<\/p>\n Nonetheless, analysts were surprised by SpaceX\u2019s willingness to pay out as much as it did given the uncertain prospects for making it back in the nascent direct-to-cell market. T-Mobile this summer launched service at an introductory price of $10 a month. Analysts guestimate the total opportunity initially could be a couple billion dollars. The big three cellular carriers could have put that spectrum to much more profitable use terrestrially, said Burnett.<\/p>\n \u201cSpaceX had to apply a terrestrial wireless price effectively for spectrum that will be used in a project that might not generate the kind of returns that you see in wireless,\u201d said Burnett.<\/p>\n