The orbital mechanics of New Space, basically, are not very complicated. Satellites take off with the boost of a nice capital injection, and then customer revenues keep the team in orbit. If, during the trip, there is a need for new money, or if said customers are slow to come forward, one of two things: either the value of the satellite train is considered reasonable and an additional financial push is possible. , i.e. the financial community – venture capital, private equity funds – judges assets to be overvalued in view of their potential. Then “the music stops”, as Jeremy Irons says in the film Margin Calland the precious machines burn up prematurely in the atmosphere.
This description reflects quite well the state of mind of the thousands of New Space companies and their financiers. Too many products are considered vague and associated with distant profitability. Generally speaking, too many companies are considered to have benefited from excessive profligacy. As a result, valuations have been halved and players who are not supported by a solid client portfolio will have the greatest difficulty refinancing.
Already, the number of financings fell by 30% during the first two quarters of 2023 with operations focusing on the largest players. Over the past three years, contributions to the “emerging” space sector have increased from 11.5 billion dollars in 2021, to 4.8 billion in 2022 and 2.7 billion for the first three quarters of this year, according to a Euroconsult analysis.
Incidentally, the sector also saw the bursting of the SPAC bubble, Special Purpose Acquisitions Companies, a speculative instrument par excellence, which are empty shells intended to enter the stock market. In mid-September in Paris, during World Satellite Business Week, the annual high mass of the commercial space, an American CEO said that the promoters of a SPAC had promised him a valuation of one billion dollars. He preferred to opt for half as much by bringing together traditional investors. It was a good thing for him because he can now calmly consider the future. Today, the sector therefore expects major consolidation before entering new markets.
The mirage of “Direct-to-Cell”
Analysts distinguish three phases in space. 2016-2021, increased activity powered by new generation satellites and more powerful connectivity; 2022-2025, cooling due to rising interest rates, increased competition between constellation operators and their associated services, and the explosion of SPACs. The 2026-2030 period is expected to experience a rebound with demand for data distribution fifteen times higher than today thanks to new markets. These will be connected objects, or even autonomous cars in rich countries. But what’s getting the most attention this fall is something called Direct-to-Cell which is the ability to establish a direct link between a satellite and a mobile phone equipped with a chip and an ad hoc antenna (like some iPhones today). The analysts’ promises are magnificent: they mention a potential turnover of 100 billion dollars annually, with a base of subscribers – whether individuals, companies or devices – of 5, 4 billion for uncovered areas and 3.2 billion for the “unconnected” market.
Worriers point out that areas with little or no service are necessarily the least profitable, even if the diversity of prices is extreme. A Gigabyte of mobile data thus costs 12 dollars in Greece, 8 dollars in the United States, 0.8 dollars in France, compared to… 0.09 dollars in India where the infrastructure is dense and competition is strong between operators. In fact, service operators Direct-to-Cell are banking on countries where poor infrastructure coupled with operator oligopolies have caused the price of mobile phones to soar. Examples: Malawi or Benin (27 dollars per gigabyte of data), Chad (23 dollars), Yemen (16 dollars), or even Botswana (14 dollars). For them, “Internet in the sky”, accessible from a smartphone, is likely to fundamentally change economies.