Can Eutelsat become Europe’s alternative to Starlink?

For years, France’s Eutelsat has been trying to build a European alternative to Elon Musk’s Starlink satellite broadband service.

The company merged with British satellite venture OneWeb in 2023, consolidating the region’s satellite communications industry in an effort to catch up to Starlink, which is owned by SpaceX.

Last week, the French state led a 1.35-billion-euro ($1.58 billion) investment in Eutelsat, making it the company’s biggest shareholder with a roughly 30% stake.

Europe largely lags behind the U.S. in the global space race. Starlink’s constellation of over 7,000 satellites dwarfs Eutelsat’s. Meanwhile, Europe’s launch capabilities are more limited than the U.S. The region still relies heavily on America for certain launch services, which is a market dominated by SpaceX.

Eutelsat currently has a market capitalization of 1.6 billion euros, much lower than estimates for Starlink owner SpaceX’s value, which was pegged at $350 billion in a secondary share sale last year. In 2020, analysts at Morgan Stanley said that they see Starlink growing to $80.9 billion in their “base case valuation” for the firm.

Luke Kehoe, industry analyst at network monitoring firm Ookla, said France’s investment in Eutelsat shows the country “is now treating Eutelsat less like a commercial telco and more like a dual-use critical-infrastructure provider” and a “strategic asset” in the European Union’s push for technological sovereignty.

However, building a European competitor to Starlink will be no mean feat.

Communications industry experts tell CNBC that, while Eutelsat could boost Europe’s efforts to create a sovereign satellite internet provider, challenging its U.S. rival Starlink would require a significant increase in investments in Low Earth Orbit (LEO) satellites.

Eutelsat’s OneWeb arm operates a total of 650 LEO satellites, which is less than a tenth of Starlink’s 7,600-strong global satellite constellation.

“To offer greater capacity and coverage, [Eutelsat] needs to increase the number of satellites in space, a task made more difficult due to the fact that many of OneWeb’s satellites are nearing the end of their lifespan and will need to be first replaced before growing the constellation’s size,” Joe Gardiner, research analyst at market research firm CCS Insight, told CNBC via email.

Ookla’s Kehoe echoed this view. “Eutelsat’s chances of achieving parity with Starlink in the mass-market satellite broadband segment within the next five years remain limited, given SpaceX’s unmatched global scale in LEO infrastructure,” he said.

“Even with the latest injection of capital from the French state, Eutelsat continues to lag behind Starlink in several key areas, including capital, manufacturing throughput, launch access, spectrum and user terminals.”

Nevertheless, he thinks the company is “well positioned to succeed in European-sovereign, security-sensitive and enterprise segments that prioritise jurisdictional control and sovereignty over raw constellation capacity.” The enterprise segment refers to the market for corporate space clients.

That’s certainly the hope. France’s Emmanuel Macron has urged Europe to ramp up its investment in space, saying last week that “space has in some way become a gauge of international power.”

When Eutelsat announced its investment from France last week, the firm stressed its role as “the only European operator with a fully operational LEO network” as well as the “strategic role of the LEO constellation in France’s model for sovereign defense and space communications.”

Earlier this year, Eutelsat was rumoured to be in the running to replace Starlink in Ukraine. For years, Starlink has offered Ukraine’s military its satellite internet services to assist with the war effort amid Russia’s ongoing invasion.

Relations between the U.S. and Ukraine soured following the election of President Donald Trump and reports surfaced that U.S. negotiators had raised the possibility of cutting Ukraine’s access to Starlink.

Germany set up 1,000 Eutelsat terminals in Ukraine in April with the aim of providing an alternative — rather than a replacement — for Starlink’s 50,000 terminals in the war-torn country.

Since then, U.S.-Ukraine tensions have somewhat cooled, and Starlink remains the primary satellite broadband provider to the Ukrainian military.

Eutelsat’s former CEO Eva Berneke has herself admitted that the company cannot yet match Starlink’s scale.

“If we were to take over the entire connectivity capacity for Ukraine and all the citizens — we wouldn’t be able to do that. Let’s just be very honest,” she said in an April interview with Politico.

Berneke was replaced as CEO in May by Jean-Francois-Fallacher, a former executive of French telecoms giant Orange.

Meanwhile, even though Eutelsat has been ramping up investments in LEO satellite with its OneWeb unit, experts say its technical architectures and orbital designs are ultimately different from Starlink’s.

“The OneWeb constellation currently uses a bent-pipe architecture, which is not as capable as Starlink satellites; therefore, OneWeb will also need to invest in second-generation satellites,” he added.

The French firm’s use cases also differ to Starlink’s. Eutelsat operates a constellation of geostationary orbit (GEO) as well as LEO satellites. GEO satellites orbit the earth at a much higher altitude than their LEO equivalents and can typically cover more land with fewer satellites.

“Eutelsat’s higher altitude satellites are leveraged for specialized use cases, such as polar coverage for companies and research facilities in remote regions like Greenland and Alaska,” said Joe Vaccaro, vice president and general manager at Cisco’s ThousandEyes network intelligence unit.

Looking ahead, Eutelsat said it plans to “build upon its operation improvements” with a “differentiated go-to-market model” and “strong European anchoring.” It also noted that the U.K. government could also increase its investment in Eutelsat “in due course.”