The highway in the sky

By Sam Green

March 29 2018
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Miniaturisation of space infrastructure is likely to change the face of telecommunications on earth.

Fifty years after the introduction of satellite communications, advancements in technology are poised to revolutionise these key pieces of space infrastructure.

The advancements have been driven by a miniaturisation of satellites and their components, which is poised to solve one of the biggest issues in existing technology – the cost.

Delivering satellites into orbit can cost tens of thousands of dollars per kilogram, with most existing telecommunications satellites weighing between 1,000 and 10,000 kilograms.

You don’t need to be good at maths to work out that sending these satellites into orbit is an expensive exercise, which translates into the telecommunications services they provide being expensive as well.

At present, calling someone on a satellite phone can cost around $2-4 per minute, and that’s before you factor in the cost of a specialised phone handset (around $2,000).

These high costs mean that if you aren’t covered by a terrestrial cellular network – you are probably not going to use any cellular service at all.

Indeed, GSMA intelligence estimates that there are more than 2.6 billion people on earth without a mobile phone connection – a potentially huge, untapped market that may be about to benefit from a proposed nanosatellite communications network.

Sky and Space Global (ASX:SAS) is an ASX-listed firm with a pretty ambitious plan; they aim to provide cellular coverage to 3 billion people, using a network of 200 nanosatellites that they have named “Pearl”.

Due to the low weight of the nanosatellites – notionally less than 10 kilograms – Sky and Space Global believe that they can they can deliver this network for a fraction of the capital expenditure (CAPEX) of the existing satellite communications networks.

The lower CAPEX means the SAS is likely to be much more cost effective and affordable in their service pricing – which should see strong take-up rates, not just from individuals, but also in transport, logistics and IoT (internet of things) applications.

In September 2017, the company launched its first three satellites, which have achieved the world’s first voice call on a nanosatellite, among other milestones. The technology has proven a success, and these first three satellites (the “three diamonds”) are already starting to generate revenues.

SAS has just completed a heavily oversubscribed $10 million placement to institutional and sophisticated investors, and has launched a $5 million underwritten share purchase plan for its shareholders.

This should allow the firm to launch the first batch of 20 nanosatellites for their “Pearl” network, and will keep them on track for the proposed 200 nanosatellite network in 2020.

This is potentially a very lucrative business with company forecast of 200 nanosatellites generating north of half a billion in revenue per annum.

APP Securities recently valued the stock at 45 cents (last traded at 11.5 cents).

Shares for Sky and Space Global can be purchased under the code: SAS.ASX.

*OzFinancial are currently assisting SAS with the management of an investor Share Purchase Plan and may receive fees depending on whether the offer is taken up by investors.

Sam Green is equities and derivatives adviser at OzFinancial.

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