Starlink’s Limited Capacity To Drive Premium Pricing In India, Says Jefferies

The limited capacity of Elon Musk-led Starlink may lead it to implement premium pricing for its services in India, suggested brokerage firm Jefferies in a report. 

However, the report noted that while India will be an important market for Starlink, its launch is unlikely to be disruptive to tele communication companies like Jio and Airtel in the country. 

Starlink’s current capacity might support 0.18 Mn subscribers in India at 100 Mbps speeds. Moreover by 2030, with a projected 30x increase in its capacity, it could serve up to 5.7 Mn users, the report added. 

Although this capacity might seem significant against Starlink’s present global subscriber base of 4.6 Mn, it will remain significantly low compared to India’s fixed-line broadband market, which at present has 46 Mn users and is expected to grow to 90–100 Mn by 2030. 

Due to limited capacity, Starlink is expected to adopt premium pricing in India, similar to its strategy in other markets. Notably, its services are priced 2–3X more expensive than traditional telecom providers in both high-income (like US) and low-income countries (like Kenya and Nigeria), the report added. 

On why Starlink’s entry wont disrupt Indian telecom operators like Jio and Airtel, the report reasoned that Starlink’s capacity constraints will necessitate premium pricing while it also needs telco tie-ups for distribution?installation and backhaul. Besides, Jefferies suggested that the government also seems to be inclined to balance the interests of telcos and satellite operators, rather than accepting everything that Satcom players have asked for. 

“Home broadband segment forms c.8-9% of Jio’s revenues and 4% of Bharti Airtel’s India revenues-ex tower, hence Starlink’s entry in this segment is unlikely to impact the fortunes of Indian telcos significantly,” the Jefferies report added. 

Not to mention, the international telcom giant inked partnership with both Jio and Airtel, earlier this month, for its distribution, installation, and backhaul services. 

The Regulatory Drama For Starlink

While Starlink is yet to the requisite licence called Global Mobile Personal Communication by Satellite (GMPCS) license for its satcom service in India, it is also awaiting the IN-SPACe approval and the allocation of spectrum from the Indian government to offer satellite-based voice and data services in the country.

Adding to this regulatory drama, a Reuters report, earlier this month, suggested that the telecom regulatory authority of India (TRAI) is mulling to recommend allotment of satellite broadband spectrum for five years against Musk’s demand of 20-year permit for Starlink’s satellite broadband spectrum. 

This might be done by the government to assess initial market adoption of satellite broadband spectrum before committing longterm to it. 

What India Means For Starlink 

Starlink doesn’t have access to the two largest countries by area, Russia and China, making countries like India (7th largest) even more important for its growth, the Jefferies report noted. 

It is pertinent to note that unlike traditional broadband services that rely on fibre-optic cables, DSL lines, or cellular towers, Starlink operates using low Earth orbit (LEO) satellites between 200 km to 2,000 km. This is against the traditional satellites orbiting at 35,000 km.

“While LEO satellite networks have their capacities distributed across the globe, they target larger countries as it unlocks a larger portion of their capacity,” Jefferies noted. 

Moreover, in the turn of events earlier this month, once contender and critics of Starlink, Airtel and Jio, turned into its partners to help it to enter the Indian turf.

However, with this team up Starlink could serve the underserved regions In India by providing internet access to rural communities, remote villages, and mountainous regions, especially the places where traditional telecom networks have struggled to reach.