Analyst Professor Tim Farrar (of TMF Associates) has released a report on Starlink’s profile and forecasts which contains detailed forecasts of the consumer, government and D2D businesses as well as analysis of Starlink’s technology and regulatory progress. Farrar also states that he has heard rumours that Starlink is developing its own smartphone.

Farrar said: “It has been interesting to compare my numbers with those published by various Wall St analysts, and understand the reasons for these differences. The range of forecasts for the connectivity segment in the reports I’ve seen is pretty wide, but all are a lot higher than my projection of $48 billion total revs and 46 million consumer subs in 2030, with total connectivity revenues and consumer subs as follows:

· Deutsche Bank: $72Bn revs, 82 million subs
· Moffett Nathanson: $73Bn revs, 70 million subs
· RBC: $101Bn revs, 100 million+ subs
· Morgan Stanley: $121Bn revs, 116 million subs.

“Unsurprisingly, the most similar forecast to mine is the one from Moffett Nathanson, as Craig Moffett and I share many of the same views about Starlink’s D2D market constraints, and used very similar methods to forecast the consumer market opportunity. The main discrepancy is in the enterprise and government sector, where I’ve broken down the revenue by enterprise, maritime, aviation and government in more detail based on Starlink’s disclosures about pricing and penetration. Deutsche Bank takes a more optimistic view of Starlink’s ability to expand consumer penetration in developing countries via aggressive reductions in ARPU, while also being much more optimistic about enterprise, government and mobility demand. And then RBC and Morgan Stanley take even more optimistic views about demand in all three parts of Starlink’s connectivity business,” added Farrar.

“One area seemingly missing from most analyst reports is an assessment of how terminal revenues and costs limit the scope for revenue growth (equipment generated $1.5 billion in revenue last year but is a one-off not a recurring revenue source) and price reductions for end customers (terminals cost an average of over $300 to produce last year). So, I end up with higher consumer ARPUs (and slower growth) than many other forecasts, because the need for terminal subsidies (and higher ARPUs to compensate) will constrain demand in developing countries,” said the report.

Farrar explained: “The biggest debate is what comes next in mobility. As I’ve noted before, Starlink Mobile’s wholesale ARPUs are far lower than most analysts expect, i.e. tens of cents rather than multiple dollars per customer (of whom less than 10 percent are active), with partner access fees (effectively minimum commitments) bridging the gap to last year’s reported revenues.”

He continued: “There’s still an opportunity to gain several billion dollars of annual revenue from the Starlink Mobile V2 constellation, if Starlink continues to offer wholesale service to MNOs at a low price (I estimate the effective wholesale capacity price could be under $2 per Gbyte on V2). But that won’t provide a return on $20 billion of spectrum purchased from EchoStar. And the JV between the US MNOs will try to drive a hard bargain on price by playing off the satellite D2D providers against one another (though AST and Amazon’s offerings are unlikely to match up to what Starlink Mobile V2 will deliver in 2028).”

“So, with MNOs wisely refusing to give Starlink an MVNO deal (thereby retaining their competitive advantage in bundled fixed and mobile services), what is SpaceX going to do? It looks like a small cell plan might be part of the answer: Starlink could copy Charlie Ergen’s plan for Clearwire back in 2013, which involved adding small cells to rooftop satellite (TV) dishes, and speculation is now mounting about perhaps even adding small cells to Cybercabs. I’ve also heard rumors that Samsung might even be building a phone that could carry the Starlink Mobile brand.”

“One potential source of spectrum for a terrestrial network would be to buy EchoStar’s CBRS spectrum, which is a lot more usable than upper C-band spectrum that won’t be available until 2031 (and isn’t compatible with current phones). And perhaps a deal with one or more cable companies that already use CBRS could be on the table: Starlink broadband could then potentially provide an out of footprint competitive solution that is analogous to FWA for the telcos. However, it remains to be seen how Starlink could address the in-building terrestrial network advantages that AT&T was so keen to highlight “in the stadium… in the hospital… in the high-rise building,” he cautioned.

“I pointed out in a recent paper that D2D complements terrestrial wireless coverage rather than replacing it, and will mostly be just a fallback option for remote and emergency use. So I don’t believe that Starlink can realistically hope to capture a sizeable part of the US wireless market with a D2D-led service, even if this was coupled with small cell coverage, unless it gained access to a terrestrial wireless network with a national footprint. And at the end of the day, while rattling the cage of the telcos may keep analysts and investors on the edge of their seats, SpaceX is all about access to space and the company’s prospects will ride (or die) on Starship,” he concluded.

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Tags: CBS, d2d, Echostar, starlink, tim farrar