What Amazon’s Globalstar Purchase Means for SpaceX
Every now and then we get a reminder that big tech’s pockets are as deep as the Mariana Trench. Amazon’s purchase of satellite firm Globalstar offers one of those reminders. Despite spending $200 billion this year on capital expenditures for its AI expansion and committing $50 billion on an OpenAI investment, Amazon can still find a few loose coins in the couch to buy Globalstar.
Amazon is paying about $4.6 billion in cash and issuing stock currently worth around $6.2 billion for the satellite firm. For that, it gets to expand the offering of its yet-to-be-launched Leo broadband satellite service to include direct-to-cell capabilities. That would help Leo compete with SpaceX’s Starlink, which already offers a limited mobile service through T-Mobile in the U.S. and other carriers overseas.
Amazon has essentially acquired an option on the possibility that the satellite mobile market will become a big thing—an outcome far from certain. As our story reported, there’s little evidence so far that enough consumers care to pay extra for satellite capabilities to justify the investments required for direct-to-cell services.
That makes sense. The ability to get a satellite signal when you’re in a national park is valuable if you break your leg while you’re hiking, but otherwise you might never think about it. Still, SpaceX CEO Elon Musk has bet he can change that with expanded mobile services such as video streaming. (Watch satellite industry consultant Tim Farrar discuss the Amazon-Globalstar deal on The Information’s Tuesday TITV.)
The big winner out of this deal, though, may be Apple, which currently uses Globalstar for the very limited satellite service offered on iPhones. The swirl of uncertainty around Globalstar’s future presented Apple with a quandary: It didn’t want to buy Globalstar itself, but it needed the service to keep operating. While critics say Globalstar’s service is slow and less advanced than Starlink’s, Apple wouldn’t have been able to switch over to a rival satellite service easily. Moreover, it has put a couple of billion dollars into Globalstar in recent years to help the company put up satellites used for the iPhone service.
Amazon’s purchase means Globalstar now has a financially solid owner, one Apple has dealt with in other business areas (Apple and Amazon already have reached a new Globalstar deal). As it has done in AI, Apple smartly lets other companies do the heavy lifting of making risky investments.
AST SpaceMobile Hit
Amazon’s purchase of Globalstar was bad news for another satellite firm, AST SpaceMobile, which is also aiming to launch a direct-to-cell service later this year in competition with Starlink Mobile.
Unlike SpaceX and Amazon—both of which will soon have their own mobile spectrum once their deals close next year—AST relies on borrowing spectrum for its service from its mobile carrier partners, which include Verizon, AT&T and Vodafone. That means AST will have a disadvantage in future negotiations with mobile carriers compared to SpaceX and Amazon, which probably explains why its shares fell 11% on Tuesday after the Amazon-Globalstar announcement.
Still, AST shares are still up nearly 300% over the past year thanks to broad investor interest in space and an enthusiastic base of individual shareholders. We’ll see if the hype about the SpaceX IPO continues to keep pushing share prices of its rivals into orbit.