Despite slowing subscriber growth, Elon Musk-led SpaceX's Starlink could emerge as a serious competitor in both broadband and mobile services over the coming years, as improving profitability may enable the company to adopt aggressive pricing strategies and challenge established US telecom operators, according to a report by Bernstein.
According to the report, SpaceX's third-quarter connectivity results exceeded market expectations, with revenue rising 69% year-on-year and EBITDA growing 82%. The EBITDA margin improved to 67% from 61% in the previous quarter, “implying expanding operating leverage.”
The company's connectivity revenue and EBITDA surpassed analysts' estimates by 7% and 16%, respectively, continuing its trend of better-than-expected financial performance. However, subscriber growth remained below expectations.
“Connectivity subscribers reached 13.6M, below 14.2M expected, following a small miss in Q2 (12M vs. 12.2M expected). Sequential subscriber growth slowed to 13% from 17% in the prior quarter, adding to suspicion that subscriber growth may be decelerating despite strong financial performance,” the report noted.
“The key takeaway, in our view, is that Starlink’s economics are improving faster than its subscriber base,” the report said, stressing that slowing subscriber growth suggests Starlink is not yet gaining enough market share to significantly disrupt traditional cable broadband and fixed wireless access (FWA) operators, limiting its immediate competitive impact.
However, it flagged that “the combination of rising Average Revenue Per User (ARPU) ($69/ month), expanding margins, and continued capacity expansion changes the long-term setup,” which means the company can become a stronger competitor over the longer term.
Bernstein further highlighted that the company's growing profitability, ahead of the planned deployment of its next-generation V3 satellites, is “allowing Starlink to consider aggressive pricing to compete for share.”
According to Bernstein, while network capacity remains a key constraint, ongoing expansion could enable SpaceX to introduce competitive pricing even before the full deployment of its V3 satellite constellation.
“While Starlink BB is the threat investors can see today, Starlink Mobile remains the bigger concern,” it stressed. - ANI
