Analysis of developments in India’s satellite internet sector and impacts across technology, telecom, and broadcasting industries.
Analysis of this news for a layman
OneWeb is a satellite communications company backed by Bharti Group planning to offer broadband internet services across India using a network of low earth orbit satellites. It has asked the Indian government for clarity on allocation and pricing of satellite spectrum required for these satellite internet services.
Spectrum refers to the radio frequencies over which internet and telecom services are delivered wirelessly. For satellite internet, key bands are Ka band and Ku band. OneWeb needs this high-frequency spectrum allocated administratively by the government rather than via auctions. India’s new Telecom Act 2023 has enabled this administrative allocation to make satellite internet services feasible.
OneWeb has also sought clarity if satellite spectrum usage will attract spectrum usage charges (SUC) – an annual fee paid by telecom operators. It is gearing up to launch satellite broadband services in India in early 2023 before Reliance Jio, Amazon, Tatas, and others who have similar ambitions in this space. Roll-out is contingent on getting sufficient spectrum allocated affordably.
Impact on Retail Investors
For retail investors, this news highlights the opening up of a new internet services domain – satellite broadband. Admin allocation of spectrum at reasonable pricing is essential for viability and scale of satellite internet in India. OneWeb’s spectrum requests to the Indian government will be a bellwether of the sector’s prospects.
If sufficient quantum is allocated at low costs, it boosts OneWeb’s plans and investment appeal. That would catalyze activity from others like Jio, Amazon, etc., too. For Bharti Airtel investors, it opens a new revenue stream via their part-ownership of OneWeb. Conversely, opaque policy or high spectrum costs will dampen viability. Failed satellite internet dreams could also benefit telecom infrastructure operators like Indus Towers, Vi as data demand shifts back to terrestrial networks.
Overall, retail investors in the telecom and technology space should monitor the policy response to OneWeb’s asks. That will determine how rapidly and competitively this nascent sector scales up. Satellite broadband promises to expand rural internet access – but needs regulatory support on public goods like spectrum.
Impact on Industries
The advent of satellite broadband has wide sectoral impact:
- Telecom – Boosts broadband infrastructure expansion beyond urban centers to tap underserved populations. This complements fiber and 5G rollouts from Airtel, Jio, etc. Fixed wireless from satellite can provide backup connectivity.
- Technology – Growth avenue for devices, VSAT hardware, ground networks for companies like Anritsu, Nelco, Cyient. Value-added services can ride connectivity – like public WiFi hotspots, digital entertainment, online education.
- Broadcasting – Satellite TV facing cord-cutting risks can bundle internet offers. Operators like Tata Sky, Dish TV get added monetization channel. Local/hyperlocal content also gets enabled.
However, unchecked predatory pricing from satellite internet providers can negatively impact sustainability of telcos and terrestrial connectivity players. Their expensive network investments need reasonable returns without destructive price wars.
Long Term Benefits & Negatives
Over 5-10 years, satellite communication offers India alternate infrastructure for universal broadband – filling rural gaps, achieving public access goals. Satellite internet can expand the market size for affordably priced data plans for the currently unconnected population.
For telcos, satellite broadband offers some data traffic offload from expensive cellular networks to ease infrastructure constraints. Satellite communication also enables innovative use cases – like connected vehicles/drones, industrial IoT, remote machine learning, and cloud analytics.
However, regulatory risk remains regarding foreign satellite operators restricted by Indian government policies. Cybersecurity and privacy concerns also exist for satellite data transmission, including national security implications. Long gestation periods and heavy capex required are also barriers given extended payback horizons.
Unless supportive public infrastructure policy is enabled, satellite broadband opportunities can fade against short-term priorities of terrestrial wireless operators.
Short Term Benefits & Negatives
If OneWeb promptly gets sufficient satellite spectrum allocated at low charge, it accelerates their India service launch timeline – potentially going live in the first half of 2023. That establishes first-mover advantages. In the short term, satellite broadband offerings can target premium institutional customers – corporates, government agencies, etc., where capacity limitations remain less restrictive initially. Fields/supervisory roles across mining, agriculture, etc., are also addressable markets.
However, regulations need to ensure a level playing field regarding SUC, licensing norms for OneWeb vs. telcos. Else unhealthy competition can undermine sustainability – especially in the lower ARPU consumer segment. Initial satellite broadband packages would also be priced higher than mass market rates. Customer experience challenges can also emerge given unfamiliarity – impeding adoption before steady upgrading of satellite fleet capabilities over 3-5 years.
So conservative projections advised near term for tangible impact before systemic improvements.
Potential Impact of Satellite Spectrum Clarity on Companies:
Indian Companies that may gain:
- Bharti Airtel (145004.NS): OneWeb’s entry in satellite broadband strengthens competition for Airtel, potentially benefiting them through increased focus on broadband infrastructure and potential partnerships.
- Reliance Jio (RELIANCE.NS): Jio’s ambitious satellite broadband plans face a stronger competitor in OneWeb, but clarity on spectrum allocation could accelerate Jio’s own rollout, boosting investor confidence.
- Tata Communications (TATACOMM.NS): As another major player in broadband space, Tata Communications could benefit from increased demand for infrastructure and network integration services driven by satellite broadband growth.
- IT Infrastructure Providers (HCLTECH.NS, INFOSYS.NS): The growing satcom market creates opportunities for IT infrastructure providers in cloud computing, network management, and satellite data analytics solutions.
- Satellite Equipment Manufacturers (MIDHANI.NS): Increased demand for satellite infrastructure could benefit manufacturers of ground station equipment and related components.
Global Companies that may gain:
- Satellite Technology Providers (Iridium Communications (IRDM.NQ), Globalstar Inc. (GSAT.OQ)): Increased focus on satellite broadband in India could benefit existing satellite technology providers through potential partnerships and equipment supply contracts.
- SpaceX (private company): While not directly mentioned, OneWeb’s competitor SpaceX could benefit from the growing awareness and demand for satellite broadband solutions globally.
Indian Companies that may lose:
- Telecom Service Providers (BSNL.NS, MTNL.NS): Existing state-owned telecom service providers might face further competition for rural broadband subscribers from satellite players.
- DTH (Direct-to-Home) Operators (DISHTV.NS, ZEEL.NS): While DTH players could potentially utilize satellite broadband infrastructure, increased competition for broadband customers could pose a challenge.
Global Companies that may lose:
- Traditional Satellite TV Providers (Dish Network (DISH.OQ), DIRECTV (T.US)): The rise of satellite broadband could further accelerate cord-cutting and challenge traditional satellite TV providers globally.
Market Sentiment: Clarity on spectrum allocation could bring positive sentiment to companies associated with broadband infrastructure and satellite technology. Bharti Airtel and Reliance Jio might initially see mixed reactions due to increased competition, but long-term potential for growth could prevail. Tata Communications and IT infrastructure providers could see positive sentiment due to their complementary role in the satcom ecosystem.
Uncertainty over spectrum allocation and potential loss of rural subscribers could negatively impact sentiment for BSNL, MTNL, and DTH operators. However, potential partnerships and diversification opportunities within the satcom ecosystem could mitigate some negative sentiment.
Note: This analysis is based on limited information and should not be considered financial advice. Market sentiment is complex and depends on various factors beyond the information provided. Please conduct your own research and consult with a financial advisor before making any investment decisions.
Source: Parbat, Kalyan. “OneWeb Pings Govt for Clarity on Sat Spectrum” Economic Times. 28 December 2022. Read More.