Pierre Lionnet 25092019 The economics of LEO constellations in 2021 Pierre Lionnet 1 Average price of satellites kg 20152020 By segment By region 25092019 The economics of LEO constellations in 2021 Pierre Lionnet ID: 932017
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The economics of LEO constellations in 2021
Pierre Lionnet
25/09/2019
The economics of LEO constellations in 2021 – Pierre Lionnet
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Slide2Average price of satellites $/kg 2015-2020
By segment
By region
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The economics of LEO constellations in 2021 – Pierre Lionnet
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Source: Eurospace LEAT database
Slide3Average cost of launch $/kg (constant e.c.)
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Source: Eurospace LEAT database
Slide4Small launcher assessment (by Erik Kulu)
Cost/kg (small launchers only)
Cost/kg vs Performance
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https://www.newspace.im/assets/Small-Launchers-2021_Erik-Kulu_IAC2021.pdf
Slide5LEO constellations prospects - # of satellites in plan
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Constellation status
Number
Nb of satellites in plan
Nb of satellites deployed
All projects
226
52000
3800
Funded projects
156
37000
3800
Source: Eurospace Constellation watch list
Slide6What is the status of commercial LEO constellations?
Current list, main projects
Constellation
Company
Status
Frequency Bands
No. of Satellites
Guowang
China Satellite Network Group
In development
Multiple
12,992
Starlink
SpaceX
FCC approved; 1,737 satellites launched, 1,447 active
Ka, Ku, V
11,943
Project Kuiper
Amazon
FCC approved; first 2 satellites scheduled for launch in late 2022 by ABL Space;
Ka
3,236
9 launches
awarded to United Launch Alliance
OneWeb
OneWeb
FCC approved; 358 satellites launched
Ka, Ku, V
648
Lightspeed
Telesat
FCC approved
Ka
298
Spire Global
Spire Global
FCC approved; 140+ satellites launched
S, X
175BoeingBoeingFCC approvedV147Subtotal29,439ProposedStarlinkSpaceXFCC applicationKa, Ku, V30000Astra ConstellationAstra SpaceFCC applicationV13600OneWebOneWebFCC applicationKa, Ku, V6372BoeingBoeingFCC applicationV5670Project KuiperAmazonFCC applicationV4538Hughes NetworkHughes Network SystemsFCC applicationV144LightspeedTelesatFCC applicationV1373IntelsatIntelsatFCC applicationV216Kuiper SystemsKuiper SystemsFCC applicationV199InmarsatInmarsatFCC applicationV198
Chart – mass at launch prospects
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Source:Doug Messier (Parabolicarc.com)
Source: Eurospace Constellation watch list
Slide7What are the economics of LEO constellations
The total funding secured by the 156 constellations amounts to 17B$ approximately.
The Top 10 gather 85% of the total funding, The Top 5 are worth 70% of the total funding OneWeb, Iridium Next,
Starlink, Globalstar (2nd-G) and SES-O3b/mPOWERNote: Guowang funding not knownThese 156 projects have already deployed 3800 satellites,
750 ton in LEO, (Top 5 represent 87% of that),
Plans to deploy 37000 in total (and >50000 if we included all projects).
Current status of completion is about 10% (or 7%).
If we accept that 90% of the capacity is
still to be deployed
,
the total Capex requirement will have to grow a lot in the coming 4-6 years. At full capacity we can assume the book value of the global constellation infrastructure to be worth much more than 150B$
.Considering a useful satellite lifetime in the order of 4-7 years, the average Capex requirements would amount to 25 to 30B$ annually Considering that >95% of that mass (and 90% of Capex) are related to communications services, we can compare with other telecommunications infrastructure and economic drivers.
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Slide8Capex of Telecommunications providers in the USA
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Annualized CAPEX for 3Q19 was 16.5% of revenues,
at the same level compared to 3Q18. Single quarter CAPEX declined 2.4% YoY in 3Q19 to $73B. The decline in CAPEX was slightly worse than the decline in revenues. In mid-2019, we had expected capital intensity to grow towards 17% by the end of the year, but telco concerns about spectrum costs, supply chain dislocations and recession worries have moderated the outlook.
MTN Consulting, LLC
Telecommunications Network Operators: 2Q21 Market Review
https://
www.businesswire.com
/news/home/20200221005137/
en
/Telecommunications-Network-Operators-Market-Review-Q3-2019---Revenue-CAPEX-and-Headcount-for-131-TNOs---ResearchAndMarkets.com
the US telecoms sector has a revenue to capex factor of 7-8
Slide9LEO Broadband constellation revenue projections
Applying this 6.6 factor to the global constellations capex would call for a global revenue of 150-200B$/year to support the constellations infrastructure, while a factor of >8 would call for revenues in excess of 200B$.
With an ARPU of 500 to 1000$/year we would contemplate a subscriber base in the order of 200-300 million. Such a high number of subscribers, most of them for broadband service, implies the rollout of a capacity in
Tbps able to serve more than 10% of the world population, (i.e. 40/60 Tbps)The current known capacity of existing systems indicate that they can only serve 10% of that.70-80% of the the LEO systems capacity is "wasted" over oceans and deserts areas
Today
Starlink
is ramping up on customers, but,
at 100k users and 120m in revenues, is still very far from significant targets
, i.e. 30B$ annually (25M customers).
And many have doubts that the constellation of 12000 and its total throughput of 71,1
Tbps can technically support such a level of revenue. Scaling it up to 42000 satellites would increase the addressable market but at a very high cost.Oneweb has already gone bankrupt once, it has now raised more capital and is completing its deployment, but its business case seems still very fragile with a total throughput of >2Tbps.
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Slide10LEO Constellations – current and projected Capex
The 750 tons already deployed represent an average Capex of 23k$/kg in orbit.
This average hides a high variability of situations, for example it is usually well admitted that Starlink deployment is far less costly than (e.g.) Iridium Next. So, is 23k$/kg in orbit cheap or not?
In absolute terms it is very cheap, compared to historic costs of satellite in orbitBut even at such a bargain price, the cost of the constellation infrastructure is unsustainableAt 20k$/kg in orbit the 37000 satellites still to be launched would cost 150B$, and again 150B$ every 5 to 7 years. And revenue potential remains very limited.To achieve profitability the LEO constellations must drive down Capex by one order of magnitude or more,
i.e. reach 2k$/kg in orbit
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Slide11But if 2k$/kg in orbit becomes the industry standard
, then, even with >900 tons/year at launch for constellation deployment in the next decade,
the total revenues of the space infrastructure industry cannot be expected to grow more than 1,8B$/year (e.g. 400M for launch, 1.4B for satellites). The current projections for multibillion space sector growth driven by the growing demand for constellation deployment are not economically sustainable.
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Slide12Key TakeAways
The mega constellations do not represent a major growth market opportunity for the space infrastructure market, due to the high pressure they put on costs to be economically sustainable.
More than 150 constellations are being deployed, having secured 17B$ in funding.The market is very concentrated, with 10 players representing 85% of the total funding and capacity.
Most of the projected capacity, mass to orbit and capex are driven by communications systems (mostly for broadband service & very marginally for mobile)Total Capex requirements for full deployment would be >150B$ or 25 to 30B$/year (at 20k$/kg)The constellation infrastructure should yield >>150B$ year to justify annual Capex, or serve 300M subscribers
This figure is inconsistent with infrastructure capacity and market demand projections.
Therefore, the constellation infrastructure
must drive down its capex by at least one more order of magnitude
to achieve sustainability.
This means that:
if the constellation infrastructure achieves the very low cost targets
required to become sustainable, and eventually deploys 40k very low cost satellites in the next decade it will only add a maximum of 1 to 2B$/year to the space infrastructure market. I.e. a growth of about 1 to 2% of the global satellite and launch marketplace
(in value) despite a doubling (or more) of the total mass launched to orbit every year. if the cost per kg in orbit durably remains above 20k$/kg and up to the 60-80k$ range, the constellations massive business case is unsustainable and significant demand
growth for the space infrastructure and launch providers will not materialise.What can be the Chinese contribution?25/09/2019
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