Ask HN: How could a Starlink IPO possibly work? | Hacker News Reader

Ask HN: How could a Starlink IPO possibly work?

5 pointsinfinitewars4 comments

If you look at just the satellites, the build + launch costs are about $2.5M ea, which is impressive to be sure. But they only last <5 years[1], so that's $500k per year replacement costs. Then if you look at their capacity, they still can't meet their FCC / RDOF broadband designation speeds, but let's be generous and say they can serve 1000 simultaneous users per satellite (their current ratio, let's say it's good enough, incl. oversubscription ratio). So that already means 50%-100% of the entire monthly Internet bill from a consumer is going to just be replacing satellites. Let alone everything else to be an ISP. This is very basic math. They need to launch more satellites if they want to hit their RDOF throughput goals and serve customers in the remaining areas. The most valuable extra-rural areas were low hanging fruit.. the future addressable market is more dense and competitive suburban areas, which further limits the number of users per satellite because users share the spectrum of a spot beam in denser areas.

Now some point to recent pre-IPO articles claiming "$8b profit" but they're grossly misleading by calling EBITDA a "profit". EBITDA only tells you that Starlink makes money on a satellite once it is already in space and connected to a user. It deletes the entire cost of building the satellite, launching the satellite, the user equipment manufacturing, and just about all other substantial expenses. Not to mention payments servicing all their debt and Starship development.

[1] 1-4 starlink sats burn up in the atmosphere every single day! https://planet4589.org/space/stats/restar.html

Starlink is the worst case of a deceptive EBITDA story having no path to a GAAP profit or free cash flow. The IPO needs to happen before people realize that the satellites that are being counted as an asset spread the deception throughout the organization, including what many people see as a big technological and profitability success in the Falcon 9 business.

If Starlink isn't generating self-sustaining income from subscribers, it can't possibly be the source of cash to refurbish Falcon 9 boosters.

In some sense the geographical concentration problems are worse with LEO satellite because LEO satellite has to cover most of the world which is mostly ocean, mostly uninhabitable, mostly uninhabited. Most of the market though is people who live in suburban and urban areas that are difficult to serve with that technology and where you are going to face pricing pressures because you have cable, fiber, DSL and wireless alternatives.

Even in the long term relatively difficult rural customers are going to get fiber and erode the market. My situation is a bit difficult because my power lines go through a wet meadow that was beaver habitat [1] but I am told they will be getting me connected in the next few months and I can ditch my fiber-to-the-node.

I think the bull case for Starlink is they get Starship working and that improves their cost structure. On the other hand, the rest of the world doesn't trust Musk and there is going to be a lot of surplus competition which is politically motivated just as there is for GPS except the economics will brutal.

I've read that China badly wants its own Starlink but it's having a hard time penciling it out because: (i) the world doesn't trust China any more than it trusts the US, (ii) China doesn't have the "Atlas Shrugged" underinvestment we have so there is a lot more fiber in places that are moderately rural [2] and (iii) China has vast amounts of ultra-rural territory but there are only so many people that live there.

[1] ... before they cut down all the trees and presumably, like any other loggers, blamed the environmentalists for shutting them down

[2] ... not to mention China developed many compact villages with moderate-large apartment buildings in many rural areas that are easy to serve

I agree the LEO internet economics are brutal. China is forced to compete because Golden Dome would lock them out of launches in the future.

Because SpceX isn't making money off selling Internet, it's posturing (as is Amazon) for the multi-trillion dollar Golden Dome program.

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