Starlink Financials - A Fuzzy Picture

I am trying to estimate Starlink's total annual depreciation. The reason is quite simple. These LEO satellites have five year life spans. Five years is very short. So depreciation is quite high. Each year a fifth of the fleet is retired. This means depreciation is high relative to revenues and also the steady state capex is quite large. Most telecom infrastructure enjoys a longer life span. The depreciation rate is a bit scary in my opinion. 

Starlink had  5,200 operational satellites in May 2024. Construction costs vary from $200K for the earliest models to $800K for the more powerful recent models just being deployed. Let's figure $500K is the average weighted construction cost. Then annual depreciation is roughly $520 million per year. 

Right now all you read in the press are good things about Starlink financials. But a private company intending to IPO generally only discloses flattering news. So far we have only been told revenues are in the billions and that the company is operating cash flow breakeven. We don't know depreciation, debt or the interest burden. Plus many important costs are unknown such as what SpaceX is charging Starlink for launches. The proper way to price these transactions is for SpaceX to treat Starlink as just another customer. In other words, arms length pricing. It is quite possible Starlink is being undercharged to make the IPO financials look better or that it is being overcharged as a captive customer of its sister company, SpaceX. We could see a scenario where Starlink goes public saddled with enormous debt whose funds ended up in SpaceX' pockets. Insiders quickly sell their shares, competition heats up, revenues don't grow quickly enough, and the whole enterprise collapses. 

This picture is complicated by the fact that Starlink faces a formidable competitor on the horizon, Amazon's Kuiper, which has enormous second mover advantages. Higher Internet throughput (as much as a full gig), greater financial strength important in case of a price war, with advantages in marketing, back office, terrestrial network costs, and greater credibility with business and governments due to its cloud offerings. I honestly cannot wait to see the IPO prospectus to peer under the hood.