Planning for Large-Scale Success of LEO Satellite Services in Africa

Considering the impact of equipment and service costs on roll-out model feasibility

Low-earth orbit (LEO) constellations are rapidly becoming a reality in Africa. Starlink is already active in Nigeria and is working on initial deployments in Mozambique and Zambia, while OneWeb is scheduled to be market-ready in Q3 2023. Amazon Kuiper, Telesat Lightspeed and various other LEO constellation projects have also announced African deployment plans.

While Starlink, OneWeb, Kuiper and Telesat are all planning to unlock the mass market benefits offered by LEO technologies, these constellations differ significantly and the commercial realities around service delivery and user terminals are also very different. By looking at key metrics, we can attempt to determine which are the best business models, what will be the effect of higher user terminal costs on the market, and finally, whether there is a golden key that can unlock the market for these operators.

Introduction

African-owned fintech platforms Chipper Cash and Payday have reported N182m (US$400,000) in Nigerian sales of Space-X’s Starlink system (Marketing Edge article, 21 Feb 2023). With the Starlink service plan costing around US$45 per month (plus a one-off equipment supply cost of US$595), a reference point has been established for LEO service charges in Africa.  Keep in mind that these USD costs are at the official exchange rate; the real cost to Nigerian end users is inflated by the need to purchase USD currency on parallel FOREX markets.

The planned entry of OneWeb into Africa means it is time to ask if we are now seeing the beginning of a large-scale LEO satellite market in Africa. In this discussion we unpack this question further and provide some metrics for possible roll-out scenarios for Africa.  For this review we will work on inputs from analysts at Quilty Space Report who stated that “we can only assume OneWeb terminal costs fall somewhere between Amazon Kuiper’s US$400 [devices] and the up-to-US$10k enterprise-grade terminals it has used thus far to power its way to being a global connectivity provider.”

Roll-out scenario planning

Since scenario planning enables decision-makers to identify a range of potential outcomes and estimated impacts, evaluate responses and manage for both positive and negative possibilities, we will consider the LEO market development in Africa through several scenarios.  

Our approach to credible scenarios planning is as follows:

1. Select a reference country. In this case we used South Africa as good current statistics are available.
2. Forecast Fibre-to-the-Home (FTTH) subscribers for the next 10 years. Using expected CAGR for broadband services, we can project expected FTTH subscribers for the next 10 years.
3. Predict LEO subscriber quantities. Using price-elastic demand models, we can use the FTTH subscriber quantities as input and then predict LEO subscriber roll-out.
4. Consumer, small business, telco and enterprise. The LEO subscriber roll-out is then modelled for different target markets using different service plan rates and different user terminal costs.
5. Constellation capacity. Based on the roll-out, we can calculate the expected network capacity required for the different service plan and evaluate that against what is planned by the different operators for the region.
6. Space service rate. Lastly, we calculate the expected space services capacity rate as a reference to evaluate the different roll-out scenarios.

Scenario planning

Scenarios for different Africa LEO subscriber roll-out options are based on the following inputs:

Consumer scenario:

If the service cost is set at US$100 and the equipment @ US$500, then expected current subscriber total is 712,017 and is forecast to rise to 1,797,036 in 10 years. Network capacity will start at 1.6Tbps, growing to 4.1Tbps. Revenues have been modelled as starting at US$71M and growing to US$179M in the same timeframe.

Small business scenario:

For a LEO service that is not vertically integrated and which has fewer options to subsidise equipment, the subscriber user terminal cost could be around US$2000. In this scenario, the small business service plan can be the focus, with a price point around US$750 leading to a current addressable market of 6,128 users with a network capacity of 21Gbps and US$4.5M revenue, growing to 15,466 users with 53Gbps of capacity and US$11.6M in revenue over 10 years.

Enterprise and telco scenario:

LEO network architectures that were designed to allow assured quality-of-service with committed information rates can enable the development of a larger enterprise and telco market. This market sector can’t be serviced by a “best-effort-option”; the requirement is for high uptime installations. In this case, the service plan should be priced at around US$1500 for  an addressable market of 1,076 users with 5.4Gbps of capacity and US$1.65M revenue, growing to 2,717 subscribers with 13.6Gbps of capacity and US$4M in revenue over 10 years.

Review

As a result of this scenario planning, several interesting outcomes become apparent:

Large market

In all cases, the addressable target market volumes and related network capacity demands are greater than LEO operators’ current capacity (remember this was only a scenario planning exercise for South Africa).  

Different needs, different services

Commercial LEO success will not involve a “one-size-fits-all” approach. Some LEO constellations will be better suited for the consumer sector; others for business, so different LEO operators may find greater relative success by catering to the needs of the market segments their service offerings are best suited to.

The LEO value proposition is different

The anchor value proposition to the market will be the high data transfer speeds offered by LEO services and the lower costs. The low latency advantages of LEO service will probably not be as important a factor in determining which markets LEO services can succeed in.  

Conclusion

Q-KON Africa’s experience with the roll-out of the Twoobii Smart Satellite Service underlines accuracy of the key outcomes of this scenario planning exercise. Q-KON Africa has built a business road map showing the way to successful development of the LEO satellite connectivity market in Africa. Through our Twoobii product deployment, we have gained the experience, capability and market footprint to continue servicing Africa’s connectivity needs as we advance into the LEO satellite services era.

By focusing on data speeds, price points and meeting the needs of different market sectors, LEO service providers can unlock significant potential revenue and position themselves for meaningful, sustainable growth when measured against key metrics including user numbers and revenue. Recognising – and addressing – the needs of the different market segments identified above will be a critical success factor for any LEO service provider.