Starlink’s present and future impact on Zimbabwe

Dr Dennis Magaya

The inaugural launch of Starlink — a SpaceX satellite internet service — in the US in October 2020 was received with enthusiasm.

The service was launched at a time when more than a dozen new generation technologies are accelerating rapidly, which is unprecedented in human history.

These technologies, which include artificial intelligence, drones and blockchain, bring huge cost savings, abundance and disruption.

Starlink uses low-earth orbit (LEO) satellite technology, at about 550-km altitude, and, therefore, can reach any part of the world. When exponentially accelerating technology is introduced, humans initially overestimate the impact and later on underestimate it because they think linearly.

This article assesses the impact of Starlink on Zimbabwe and expectations going forward.

Impact

Firstly, the impact is assessed from a global context since the service is available worldwide. Secondly, the assessment is based on trends in African countries where Starlink was launched.

Thirdly, we look at the impact on social-economic spheres and telecoms industry dynamics in Zimbabwe.

As of May 2024, Starlink had launched in 110 countries and had four million subscribers in total.

From May to September 2024, it connected 7 700 customers per day.

As of September 2024, they had about 6 300 satellites in orbit, which is 67 percent of all earth’s satellites.

Their goal is to reach 12 000 satellites.

The company is forecast to generate US$6,6 billion revenue this year, which is an increase of 80 percent from 2023.

The first African country to launch Starlink was Nigeria in January 2023.

On September 7, the service launched in Zimbabwe, bringing its tally of African countries to 14, including Malawi, Zambia, Rwanda, Mozambique, Kenya and Mauritius.

The service is suitable for remote businesses that specialise in agriculture, aviation, maritime, humanitarian assistance, mining, tourism, as well as high-income individuals in rural areas without mobile coverage. In urban areas, its suitable for middle- to high-income individuals and high-income areas that don’t have fixed broadband. Starlink appeals to urban businesses that are expanding, verticals with branch networks and those requiring redundancy, where damage to terrestrial or submarine internet is prevalent.

It brings coverage anywhere at rapid installation speed.  The broadband penetration in Zimbabwe is 76 percent based on mobile numbers and 62 percent based on internet-capable phones.

This is a potential market for Starlink, whose monthly fees are comparable or lower than similar mobile and fixed offerings and has unlimited usage.

However, at US$30 monthly fee, which is 15 percent of Zimbabwe’s average household income of US$202, Starlink is still beyond reach of the broadband mass market, which is generally served by mobile operators. The US$223 entry level kit price is much higher than a smart phone priced at US$45. As of June 2024, Econet had a 88 percent and 74 percent share of voice and mobile data traffic, respectively. So, Starlink’s impact in the mobile segment depends on how Econet, the dominant player, is affected.

Although Econet is pushing SmartBiz to compete with Starlink, in the absence of 5G, mobile offerings have inferior speeds.

Other countries where the satellite internet service was launched show that the initial Starlink impact on mobile subscribers is limited.

Zimbabwe has a huge informal market  which is also referred to as a US$1-per-day economy because of low daily expenditure levels.  So, Starlink will struggle to penetrate this market given the US$30 monthly subscription and US$223 terminal cost.

The US$30 is almost four times higher than the US$8 average revenue per user (ARPU) for mobile networks.

In addition, the contribution of mobile data to total mobile revenue is about 45 percent, while voice stands at 46 percent. This means without any impact on mobile voice, Starlink’s impact is limited in the mobile space.  However, the US$30 monthly fees with unlimited internet undercut local fixed broadband players and force mobile players to freeze price increases.

Customers will, therefore, enjoy lower fixed broadband prices even going into the future. The fixed broadband operators’ revenue will decline as they reduce prices to compete.

The incumbent fixed broadband customer growth will also slow down.

Firstly, Starlink will take existing mobile broadband customers who receive bad quality due to unviability of a broadband data solution fit for purpose.

For instance, a remote farmer served by poor-quality 3G network will switch to Starlink. Secondly, new customers that could not be served by fixed or mobile will take up the service. There are rural areas with a population density per ward inadequate for viable fibre or mobile base station.

Thirdly, customers that were being overcharged will shift to the satellite service.

Fourthly, there are customers in urban areas where fixed broadband operators are slow to install or provide poor service.

Complementary

Starlink will, therefore, increase broadband penetration in Zimbabwe.

Starlink, mobile and fixed broadband are primary connections for different segments. They are complementary such that Zimbabwe will experience a net positive gain in internet usage.

The satellite internet service is nomadic, sometimes geolocated within five kilometres, and the router only covers an eight-metre radius for few hundred users. Conversely, fibre and mobile address more customers; however, they have their own place. When mobile arrived 30 years ago, there were fears that the fixed line would die.

However, only fixed line voice was affected while fixed broadband continued to grow. Starlink offers competitive upload and download speeds ranging from five to 10 Mbps (megabits per second) and 25 to 100 Mbps, respectively.

Its latency of 25-60 milliseconds is  however higher than the average fixed broadband latency of 15 milliseconds in Zimbabwe.

The entry level package is suitable for common internet activities like social media, email, online shopping, streaming a movie, but bandwidth-hungry services like online gaming are problematic.  Starlink’s current focus is on connectivity and soon we should expect other use cases such as remote sensing and earth observation.

The service put a cap on internet prices through its fix subscription for unlimited usage.

This leads to shrinkage of profitability in broadband data and, to a less extent, mobile operators. Econet is already moving to ringfence its traditional mobile services.

So, the overall industry profits will drop.  The biggest Starlink impact will be on the Zimbabwean telecoms operators’ business and operating models.

A business model is how a company creates and delivers value.

An operating model is how a company is structured and how work is done on the ground.  When the business model and operating models are outdated, this results in limited innovation, higher prices, poor customer experience and an industry that is several decades behind others.

Telecom business models have remained static since inception several decades ago.  The telecoms business model is not digital and is outmoded compared to other sectors like financial services. Competitive advantage is derived from physical infrastructure rather than cutting-edge digital customer experience and service.

Value-added services contribute less than 10 percent to revenue and for fixed broadband its almost zero.

Operators like Liquid make money from providing Econet with internet which is also an indication of a vertically integrated business model with limited innovation.

Fixed broadband operators, where revenue comes from connectivity in retail, will be significantly affected.

The smaller fixed broadband operators have an existential risk.

Starlink will force telecoms operators to introduce new generation non-linear business models in order to survive.

Although telecoms is technology-driven, the internal business operations are still manual and costly.

Entry of the new service will force telecoms operators to re-imagine the operating model to reduce costs through digital and intelligent automation.

There are fixed broadband operators that simply reduced prices to match Starlink.  This is suicidal if the operating model is not transformed because the cost structure, customer reach, product and services, and organisation structure remain unchanged while the revenue drops.

The price reduction is a survival knee-jerk reaction that doesn’t increase sales.  On the contrary, the Starlink operating model doesn’t have operations expenditure in Zimbabwe because of the do-it-yourself kits.

Starlink can be the biggest internet service provider without operations on the ground, just as Facebook is a great media company without employing a single journalist.  Infrastructure sharing among telecoms operators will now become a necessity in order to drive down costs.

Starlink will push local operators into real innovation and better customer service.

The only big change experienced are increases in speed from 3G to 4G but there is almost no service or product innovation. In some cases basic things like Call Centres do not work.

In fixed broadband, innovation is limited to packing speed and price points packaging. Facebook and WhatsApp are abundance models, but telecoms operators converted them into social media bundles, which we expect to change due to the advent of the new service.

If accelerating technologies such as AI (artificial intelligence) and IoT (internet of things) are added to Starlink, the impact on economic growth is significant.

Such technologies reduce service costs to almost zero and create abundance in domains like education and agriculture.  Imagine loading all the education materials to an AI, which every child uses for free.  Imagine all the agriculture materials are loaded onto an AI for farmers to access for free.

Risks

A risk is that Zimbabwe may destroy the local telecoms industry and export jobs to USA.

However, other jobs enabled by cheap and affordable internet may emerge.

But our children may not have a telecoms industry to work in if satellite-to-mobile phone becomes a reality because mobile telecoms will die.

Disruptive global technologies may lead to a technological recolonisation of Africa since the continent is a technology consumer.  A viable telecoms industry is a cornerstone for a home-grown ICT industry.

Currently, telecoms generate about US$850 million in annual revenue.

However, more than 95 percent of what is required to make a telephone call is imported.

The arrival of disruptive telecoms like Starlink can make the situation worse.

Ominously, in January 2024, Starlink successfully tested first text messages using new direct-to- cell satellites.  This allows mobile phones to receive Starlink directly.

The SpaceX’s bigger picture is to send humans to Mars and colonise the Red Planet.

And the satellite internet service will be important for high bandwidth communication to and on Mars.

Overall, SpaceX’s Starlink launch is a teaser of a possible massive impact to come in future.

Dr Dennis Magaya is the CEO and founder of rubiem. He is also chair of AI Institute Africa. He is reachable on dennis@rubiem.com