Bharti ploughs $500m into OneWeb as Musk eyes $30bn satellite spend

OneWeb this week declared itself “financially secure” after receiving a further $500 million investment from shareholder Bharti Global, while arch-rival Starlink’s founder Elon Musk shared figures that suggest his company is far from it.

Speaking at Mobile World Congress in Barcelona, Musk was surprisingly frank about the cost of the Starlink satellite Internet service that he is pitching as a product to fill the gaps in fibre and 5G coverage.

By the time that Starlink reaches fully positive cash flow, investments in it “will be at least US$5 billion, maybe as much as $10 billion,” Musk said. “It’s quite a lot!”

And that is far from being the end of the spend. Ongoing investments into technological advancements and so forth will push the total figure to “$20 billion or $30 billion over time,” Musk said.

With an upfront case base like that, it is little wonder that questions remain over the financial viability of the business, particularly in a market segment littered with the remnants of satellite providers that have tried and failed in the past.

“Step number one for Starlink is don’t go bankrupt,” Musk said, referring to the litany of satellite providers that are now defunct or have emerged from bankruptcy under new ownership. “If we succeed in not going bankrupt then that’ll be great and we can move on from there,” he said.

The executive did not mention OneWeb by name, but the company is, of course, the modern day poster child for the financial precariousness of the satellite broadband business.

The week, India’s Bharti Global – which famously joined the UK government in rescuing One Web from bankruptcy less than a year ago – announced it will exercise a call option later this year that will see it invest an additional $500 million into the company. On completion of both the call option and Eutelsat’s recently-announced $550 million investment, OneWeb will be fully funded, having attracted $2.4 billion of investment and holding no issued debt. Bharti will be the company’s largest shareholder with a 38.6% stake, while the UK government, Eutelsat, and Japan’s Softbank will each hold 19.3%.

“The completion of our funding puts OneWeb in a powerful position. We have significantly lower entry cost of any LEO. We benefit from $3.4 billion of pre-Chapter 11 investment by the original shareholders, making new OneWeb a three-times lower cost constellation,” said chief executive Neil Masterson.

“With the forthcoming launch we will have completed 40% of our network,” he said, referring to the firm’s plans to carry out its eighth satellite launch on Thursday covering the Arctic region. “We are intently focused on execution and just ten more launches will enable us to deliver global coverage,” he said.

Starlink is also making a play for global coverage, its aim being to provide connectivity to the 3% of the world’s population that is the most difficult to reach, potentially rising to 5%.

“Starting in August we should have global connectivity for everywhere except the poles,” Musk told MWC attendees, highlighting the fact that the system is already up and running and serving real customers.

“We recently passed the strategically notable number of 69,420 active users,” Musk said, adding that the firm is shooting for something in the region of “500,000 users within 12 months.”

Given the prices those customers are paying, it is clear why the financials do not yet stack up.

Customers pay $500 to order a dish, and that’s a consistent price worldwide, with the exception of various taxes and important duties, Musk explained, while the service itself costs $100 per month.

“We are losing money on that terminal right now. That terminal costs us more than $1,000,” he said, admitting that that situation has to change; Starlink cannot make subsidies like that work at scale. A key area of development for the company is getting the cost of the dish down to around the $300 mark.

Selling services to end users is not the only way for Starlink to make money though. Musk revealed that the company has inked partnership deals with two major global telecoms operators, who have thus far declined to be named. It can offer telcos two services essentially: data backhaul for cellular stations in remote regions; and helping them to meet coverage targets in a way that makes economic sense. “[We can] take care of the rural customers that are required by your 5G licence,” he said.

It will be interesting to see which telcos are working with Musk, if they ever come forward, and also how significant that side of the satellite operator’s business turns out to be.

“[We are] in discussions with a number of other telcos,” Musk said.