Europe’s Starlink-lite is a worthwhile also-ran
The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Updates to add graphic.
By Jennifer Johnson
LONDON, Nov 21 (Reuters Breakingviews) -Right now, nearly 11,000 working satellites orbit the Earth. Over 60% are owned by Starlink, the telecoms arm of Elon Musk’s $200 billion-plus SpaceX. A new European Union-backed effort to turn the bloc into a player in space-enabled internet provision won’t change that – but that doesn’t mean it’s a waste of time.
Most people still access the internet via underground cables and cell towers. But while “satcom” only makes up a small percentage of the global telecoms market – less than 2% according to investment bank Bryan Garnier – it’s increasingly important for connecting remote or inaccessible areas. Ukraine has famously relied on Starlink terminals to keep its military, hospitals and businesses online throughout its war with Russia. In the name of “digital sovereignty”, the European Commission last month granted a group of homegrown companies a contract worth at least 6 billion euros to build the IRIS² satellite constellation.
As with most comparisons between slow-growth Europe and the U.S., the gap between IRIS² and Musk’s privately held SpaceX – which only launched its first satellites in 2019 – borders on the embarrassing. Europe’s effort will only amount to 290 satellites and won’t become operational until the 2030s. And unlike SpaceX, the jumble of companies and agencies that form the European consortium – including France’s Eutelsat ETL.PA and Luxembourg’s SES SESFg.LU plus Airbus AIR.PA and the European Space Agency – look decidedly underpowered.
Shares in 1.8 billion euro Eutelsat and 1.5 billion euro SES have tumbled by around 75% in the past five years as demand for legacy products, like satellite TV, slowed. SES took on significant debt to finance the $3 billion purchase of U.S. rival Intelsat this year. Eutelsat’s debt was downgraded to junk last year by the three major credit rating agencies following delays to the rollout of satellite ground infrastructure at OneWeb, the UK outfit it acquired in 2023.
The good news pertaining to IRIS² is that it will generate at least some revenue: European Union institutions will use it on data security grounds, and the EU has promised 2.4 billion euros in public funds. More to the point, the benefit of having space-enabled internet capability that isn’t beholden to Musk cannot just be measured in financial terms.
That said, returns still matter. While SES Chief Executive Adel Al-Saleh recently assured analysts those from IRIS² would allow it to maintain its investment grade credit rating, the project faces a struggle to secure customers who don’t have to use its services. On top of Starlink, Amazon’s Project Kuiper constellation will see another 3,000 U.S. satellites lobbed into orbit.
Guillaume Faury, CEO of $115 billion Airbus – which supplies components but not capital for IRIS² – has urged Europe’s space players to consolidate further. He should know – Airbus, after all, is an example of a European joint enterprise that became a world beater. The problem for EU satellite bulls is that that took decades.
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The European Union last month awarded a consortium of European companies – led by satellite operators SES, Eutelsat and Hispasat – a contract to develop the IRIS² constellation.
Comprised of over 290 satellites, the European Commission says the project will provide governmental services by 2030, while “enabling commercial services”.
Graphic: The US leads the world in launching objects into space https://reut.rs/48YuPgw
Editing by George Hay and Oliver Taslic
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