United StatesThe satellite communications sector is undergoing a major transformation. Starlink, SpaceX’s innovative Low Earth Orbit (LEO) constellation, is reshaping the satellite broadband market.
Investor concerns around the long-term viability of legacy satellite business models, amid intensifying competition, are reflected in the recent underperformance of high yield satellite bonds.
In our view, though, the sell-off has gone too far. Current valuations often reflect headline risk more than credit fundamentals. We believe this market dislocation creates opportunities for selective credit investors willing to differentiate between structurally challenged and strategically evolving operators.
Starlink’s commercial lift-off
Starlink’s growth has been dramatic. Since deploying its first operational satellites in late 2019, the Elon Musk-founded company has reached 5mn subscribers globally, primarily in consumer broadband.1 It has plans to launch thousands more next-generation satellites, dramatically increasing capacity over the coming years.
SpaceX has made LEO economically viable by leveraging three key innovations. First, reusable rockets like Falcon 9 and Starship have drastically reduced launch costs – by as much as 90% per kg.2 Second, mass production has significantly lowered satellite costs. Third, vertical integration, from rockets and satellites to ground stations, eliminates reliance on third-party suppliers and further reduces costs.
This competitive disruption has hit legacy operators in the consumer satellite broadband market, with both Hughes Network Systems and Viasat losing subscribers since 2021.3 Starlink is now the leading US satellite broadband provider by subscribers, and is expanding into the maritime, aviation and enterprise end markets.4
Source: Deutsche Bank estimates based on company filings, January 2025
Subhead: Global satellite industry revenues by end market, 2024 vs 2030, estimated (US$bn)
Overview: This bar chart compares estimated global satellite industry revenues in 2024 and 2030, by sector of end demand. The breakdown by sector is consumer, government, enterprise, aviation, video broadcast and maritime.
This chart shows that the industry is projected to rapidly expand in the second half of this decade, especially the consumer satellite communications market. Growth is forecast across all other sectors of end demand except satellite video broadcast, which is expected to decline in value by 2030.
The fundamentals of an expanding market
The satellite communication (satcom) market is projected to grow at a compound annual rate of 25%, reaching US$65bn by 2030, driven by rising global demand for connectivity and data.5
Consumer satellite broadband is projected to be by far the fastest-growing segment this decade, growing at 47% a year. However, it currently remains a relatively small portion of total industry revenue (20% in 2024).6
Government, enterprise and mobility end markets account for almost half of global satcom revenues and are each expected to continue expanding this decade. The competitive threat from Starlink is more nuanced across these verticals.
Government and defence clients, which value redundancy, security, and proven partners, continue to rely on legacy geostationary (GEO) satellite networks. These relationships are often longstanding and remain sticky due to regulatory, technical and procurement barriers. Hybrid models that combine LEO and GEO networks are increasingly favoured by agencies seeking orbit diversity for mission-critical communications.
Similarly, many airlines and maritime satcom clients remain hesitant about fully adopting LEO technology due to coverage gaps, hardware retrofits and rain-fade issues (where signal quality is degraded by precipitation). Users continue to prioritise guaranteed uptime and global coverage, meaning legacy providers – most of whom we expect will offer a multiorbital service – still hold a competitive advantage in many applications.
There is an additional nuance regarding Starlink’s competitive threat in the form of political dynamics. The increased political activity of SpaceX CEO Elon Musk and controversial decisions during the Ukraine/Russia conflict have prompted some foreign governments to reconsider contracts previously earmarked to Starlink.7 It is conceivable that this could tilt the competitive balance in national security-sensitive tenders towards providers seen as more politically neutral.
Credit opportunities amid industry disruption
During rapid industry change, credit markets often price legacy operators with a broad brush, overlooking issuer-specific fundamentals. We observe this dynamic here: high yield satellite bonds underperformed telecom peers, and the broad US high yield index, by approximately 400 basis points in 2024.8
Admittedly many legacy providers are heavily indebted, having borrowed to pursue expansion in the face of competition from Starlink.9 Some may ultimately have to restructure their debts. In our view, though, market-implied default probabilities often exceed, in our view, what fundamentals justify.
We believe this creates opportunities for credit investors focused on relative value, especially among operators with sound liquidity, manageable maturities and resilient business models.
Capital allocation and balance sheet positioning are increasingly important. Issuers with liquidity buffers, either through revolving facilities or cash, and optionality to monetise non-core assets (including spectrum licenses and ground stations) are better positioned to manage near-term volatility. Several legacy operators have already demonstrated this: Viasat recently sold its Link 16 tactical data unit for US$2bn, freeing up cash for deleveraging.10 Eutelsat, meanwhile, has highlighted options to divest infrastructure assets to support refinancing.
From a credit perspective, we believe investors should focus on companies with resilient business models, whose management is focused on capital allocation discipline, deleveraging and financial flexibility.
We look for five attributes among issuers in the satcom sector. First, durable government/defence relationships that are insulated from consumer churn. Second, differentiated enterprise or mobility assets supported by service-level agreements. Third, credible GEO-LEO hybrid strategies via M&A or partnerships. Fourth, prudent capital allocation and leverage management. Finally, liquidity cushions and refinancing flexibility.
‘Space junk’ label is undeserved
Starlink has clearly shifted the competitive landscape in the satellite sector, but not all incumbents are equally exposed or priced. Some overleveraged legacy providers may not survive, but structural long-term demand dynamics are supportive for companies that can adapt and capitalise on high-growth verticals, particularly in hybrid and multi-orbit deployments.
For investors willing to dig into capital structure and business model detail, we believe the sector presents one of the more compelling relative value opportunities in credit markets. The trajectory of high-yield satellite bonds may have been disrupted by Starlink, but legacy business models are by no means all defunct.
1 Starlink, March 2025
2 Seibert, J., 31 July 2024: ULA vs SpaceX – A Detailed Comparison in 2024. Space Insider
3 Hughes / Viasat company filings, as at January 2025
4 S&P Global, November 2024: Satellite Providers Pulled Into Starlink’s Orbit
5 Deutsche Bank estimates based on company filings, January 2025
6 Deutsche Bank estimates based on company filings, January 2025
7 CBC News, 5 March 2025: Ontario cancels $100M Starlink deal, leaving northern communities in digital limbo
8 Bloomberg, April 2025
9 Hollinger, P., Healy, E. & Jopson, B., 26 March 2025: ‘No substitute’: Europe’s battle to break Elon Musk’s stranglehold on the skies. Financial Times
10 Viasat, January 2023: Viasat Completes Sale of Link 16 Tactical Data Links Business to L3Harris Technologies for $1.96 Billion
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