Apple’s pitch for satellite investment anticipates the misadventures to which humans are prone. Get stranded up a mountain with no mobile signal and your iPhone 14 will text out an SOS. The idea is to make smartphones even more indispensable.
But distress signals are unlikely to be the end of Apple’s ambitions. Just as the company has begun to use more of its own chips to increase autonomy over hardware manufacture, Apple may hope that satellites will give it more control over connectivity. The result could be direct competition with wireless carriers such as AT&T.
Satellite/smartphone deals are all the rage. Huawei is working with China’s BeiDou satellite network while T-Mobile has signed a deal to connect smartphones to SpaceX satellites. SpaceX boss Elon Musk also claims to have had conversations with Apple. Amazon has partnered with Verizon, OneWeb with AT&T and Nokia with AST SpaceMobile. Some aim to connect satellites directly to phones, others to cell towers.
Apple’s deal with satellite communication company Globalstar aims to provide a direct phone-to-satellite service to customers in the US and Canada before the end of 2022. The tie-up has pushed Globalstar’s share price up more than 57 per cent this year.
Satellite expansion requires large-scale investment for returns that may be years away. Lossmaking Globalstar’s revenues were just $124mn last year. Luckily, Apple’s free cash flow was $93bn, up a quarter on the previous year. This covers the capital expenses of sending up new satellites plus recurring service fees.
Apple also has warrants to acquire up to 2.64 per cent of Globalstar’s outstanding stock at $1.01 (43 per cent below Friday’s price). In return, it will control 85 per cent of network capacity.
Potential gains could be vast. If satellite services go beyond emergency texts to internet connections, Apple could add another source of recurring revenue. Internet access in any location is valuable. Say 1 per cent of US iPhone users paid $100 a month for access. The service would add close to $1.5bn to the company’s annual revenue.
The challenge is regulatory approval. There are thousands of satellites in low Earth orbit and tens of thousands more are planned. SpaceX alone wants 42,000. Overcrowding risks accidents. But Globalstar comes with a satellite network plus approval for satellite-based mobile services. Apple’s new partnership gives iPhones another advantage.
Apple/satellites: smartphone service from space could add millions of new customers Republished from Source https://www.ft.com/content/0cba11e3-e7b7-4db6-b895-7f8e877b787d via https://www.ft.com/companies/technology?format=rss