Since LEO services fall under the umbrella of the telecommunications industry, the logical expectation is that emerging LEO services will be deployed by current mobile network operators (MNOs) in their respective markets.

For example, in 2024, sub-Saharan Africa had an estimated 950 million mobile subscriptions – a total that’s projected to grow to 1.2 billion by 2030. Adding a couple of extra million LEO subscribers to this mobile network service portfolio therefore looks to be a readily achievable task and a low-effort, go-to-market option for global LEO constellation operators. Yet, when you consider that satellite services require both a different architecture and deployment model, it becomes apparent that they might not fit so readily into established telco business models.

This could lead to an interesting scenario, with LEO growth potentially stymied by the lack of a suitable industry structure within which to bring LEO services to market. Our contention is that LEO satellite services are currently too small to be of interest to the big telcos, yet too big for traditional geostationary satellite, wireless and other service providers. This creates something of a dilemma: which route to market LEO service providers should take.

Commercial aspects

Let’s begin by considering the commercial aspects of a LEO roll-out in an MNO context. For reference, we can consider Vodacom Group, whose revenue was R73.5-billion in the six months to 30 September 2024, with year-on-year growth of some 36.9%.

It is estimated that Africa has around 336 000 Starlink subscribers, out of a global total of 5.4 million. Let us consider a possible pan-African LEO network scenario with one million subscribers at an average revenue per user (Arpu) per month of R400, for a total revenue of R4.8-billion/year. This is equivalent to just 3.2% of Vodacom’s R151-billion annual turnover. Even if we factor in Vodacom’s potential resale of LEO services at a possible 20% margin, this would only add a further R960 million or 0.64% of the company’s turnover.

Will any telco be interested in onboarding a product – and assuming the associated risks – for revenue which, while substantial, would be minimal in the context of their overall business?

Product positioning

In some cases, telcos may onboard new services even without a compelling business case when these services bring additional strategic value or operational efficiencies to the organisation. Yet even this rationale doesn’t necessarily carry sufficient weight.

LEO services offer the market only limited extra capacity (estimated to be a mere 4% of the overall demand per country), and they require a high-touch deployment programme with physical installations by professional teams backed by extensive equipment, logistics, warehousing and distribution spend.

Added to this is the fact that mobile operators will effectively only be resellers with no easy means to control or determine service quality, product definition and differentiation. This adds up to a rather bleak and low-value proposition for mobile operators and telcos that might be considering adding a LEO service to their portfolios.

Yes, the ubiquitous coverage offered by satellite services is an attractive product feature that might motivate mobile operators to adopt LEO services – even if only to respond to regulatory pressure to ensure 100% population coverage. In this scenario, the business case drivers for MNOs are more compliance-related than based strictly on ROI metrics, although this could still be considered a sufficient incentive. The flip side is of course that there is unlikely to be any real push of the product to market, which will in turn diminish its appeal to LEO operators.

This leads us to believe that MNOs and telcos will conclude that the inherent commercial and business advantages of LEO services are not significant enough to justify their onboarding.

Viable alternatives

One possible alternative for LEO operators is to partner with established geostationary satellite (GEO) service providers as a go-to-market model. In this scenario, the product alliance is primarily positive, but could create competition issues between emerging LEO services and existing GEO offerings.

The key issue, however, is that there are currently no established GEO service providers able to readily upscale to servicing a one million customer subscriber base. This is why we refer to LEO services being too big to handle for the smaller operators.

Another option is for the LEO operators to adopt a direct-to-market model; in the context of this discussion, this may be almost the only logical choice open to them. However, this option is complicated by the fact that the African telecoms landscape is a highly regulated environment and that global LEO operators cannot easily achieve the necessary local approvals. Even if an operating licence is obtained, the market will expect tailored local support.

Conclusions

This dilemma facing the LEO industry – namely, that it is “too small for the big telcos and too big for the small telcos” is exactly why opportunities are currently opening up for a new generation of more agile, innovative telcos, whether as new businesses backed by venture capital or through current providers pivoting to take advantage of new opportunities.

For example, Q-KON, with its Twoobii Smart Satellite Service, is a specialist satellite provider already established as the “satellite services factory” for Africa. Q-KON has focused on mapping go-to-market models between global operators and the African market, and is now poised to play a leading role in unlocking the market for LEO services across Africa.

For more info about Super Smart Twoobii-LEO Satellite Services, click here.

About the author
Dr Dawie de Wet (Pr Eng, MSc Eng) is group CEO of Q-KON, a leading satellite engineering company pioneering smart satellite services in Africa through its flagship service, Twoobii. Q-KON delivers resilient and innovative services by tailoring global satellite technology to the specific needs of the African enterprise landscape. With over 30 years of experience in designing, engineering, developing and implementing wireless, microwave and satellite communication systems in Africa, De Wet steers the company’s focus on developing telco solutions that meet the user requirements of emerging markets through the deployment of world-class technology.