 "Starlink deal: Regulatory, pricing woes outweigh positives for Airtel, RIL")
India’s biggest telecom players, Bharti Airtel and Reliance Industries-backed Jio Platforms, will soon bring billionaire Elon Musk-led SpaceX’s Starlink satellite services to India. According to analysts, the move could boost India’s tele density, especially in the rural areas, and may be an opportunity for investors to add the two stocks on dips for long-term gains
They, however, cautioned that in the near term, ambiguity over regulatory clarity may keep upside in the stocks restricted.
“Long-term investors may find attractive entry points in these stocks amid market corrections. Gradually adding these stocks during dips can enhance portfolio value, especially as telecom expansion, 5G adoption, and digital initiatives drive sustained growth prospects for Bharti Airtel and Reliance Jio,” said Siddhesh Mehta, research analyst at SAMCO Securities.
Earlier this week, Sunil Bharti Mittal-led Bharti Airtel announced its partnership with SpaceX to bring Starlink’s high-speed internet services to its customers in India.
Mukesh Ambani-backed Jio Platforms also announced a similar agreement with SpaceX, revealing that Reliance Jio will not only offer Starlink equipment at Jio’s retail outlets but also establish a mechanism to support customer service installation and activation.
The analysts at Citi Research said the deals would be more suited for servicing remote rural areas with coverage gaps than high-density urban areas where satellites may not be able to match terrestrial networks in terms of capacity and coverage.
That apart, both the telecom players could use this partnership to expand their business-to-business (B2B) connections and related offerings to enterprises and businesses in areas that otherwise lack fibre/fixed wireless access (FWA) connectivity, analysts said.
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Pricing, regulatory hurdles
While the move remains sentimentally positive as tying up with Starlink, rather than competing with it had it come on its own in India, has tilted the scales in the favour of Airtel and Jio, analysts say it is too early to cheer the wins amid regulatory hurdles and pricing pressure.
The agreements are contingent upon obtaining necessary regulatory approvals from the government, which has earlier expressed concerns over its privacy policies, they said.
India’s cost-sensitive market, they added, presents a challenge as Starlink’s global pricing is significantly higher than local internet rates.
According to an analysis by JM Financial, Starlink (and other satcom companies) have globally priced satellite internet plans at $10-500 per month, excluding the one-time cost for hardware (which is $250-380). This is 7-18 times more expensive than Indian telcos’ home broadband plans (i.e., FTTH/FWA) that start from $5-7/month, said the brokerage.
Meanwhile, Bernstein thinks Starlink's price is almost 10-14x higher than India's major broadband providers. The current price, they said, is very high, especially for the target rural market.
"Unless the Indian government offers subsidies to LEO players, Starlink may struggle to compete with more affordable alternatives already available in the country," it said.
Starlink’s satellite internet use case, thus, will focus on providing network to rural and remote regions, complementing Bharti/Jio Fiber and AirFiber broadband business, it said.
“We believe the agreement seems limited to Bharti/Jio distributing Starlink’s satellite broadband services via their extensive retail network, mostly to B2C and B2B customers in rural and remote areas, in return for some distribution income. However, the direct contribution to their overall revenue is likely to remain limited,” it added.
Jio and Airtel have their own satellite broadband ventures - Bharti-backed Eutelsat OneWeb and Jio’s JV with SES (Orbit Connect India), which are ahead of Starlink in terms of securing the licences from the Department of Telecommunications (DoT) and approvals from IN-SPACe.
“We believe this agreement with Starlink will only help telcos position themselves as facilitators in bringing satellite connectivity to a wider customer base in India,” JM Financial said.
Against this backdrop, analysts suggested investors closely monitor revenue growth, subscriber additions, and the impact of 5G adoption on profitability.
“Reliance Industries presents a better earnings momentum, going ahead, and the potential listing of the Jio telecom unit, amid Starlink deal, could be a major positive factor supporting the company,” said Vishnu Kant Upadhyay, AVP for Research & Advisory, Master Capital Services.