The richest man in the world strengthens his businesses in Mexico. Starlink, the satellite internet unit of SpaceX, owned by magnate Elon Musk, won two contracts in a tender from the Federal Electricity Commission (CFE) in its Telecommunications and Internet for All (CFE-TEIT) branch to supply the satellite internet under a contract that extends until December 2026.
In accordance with the ruling report published by the state company this Monday, Starlink Satellite Systems of Mexico won the contest against two other companies for “having offered the best conditions in terms of price.” According to the document, the agreement is for a minimum of 887.5 million pesos and a maximum of up to 1,775 million pesos (a little more than 101 million dollars).
The agreement between the Mexican State company and the internet provider contemplates providing low orbit satellite Backhaul connectivity service, as well as associated equipment to launch telecommunications infrastructure within a public internet and telephone access program of the CFE in rural areas of Mexico where there is currently no connectivity.
Although this is the South African tycoon’s second business venture in the country, the challenge of operating in the telecommunications sector is enormous. Although more than 25 million Mexicans are disconnected, providing internet via satellite represents a small sector. According to data from the Federal Telecommunications Institute (IFT) until March 2023 (the most recent data), there are 26.3 million Fixed Broadband internet connections (BAF) in the country.
Fiber optic technology is currently the most used, with 44% of connections and where Telmex, owned by Mexican millionaire Carlos Slim, has the greatest penetration in the country. Only 0.6% of internet connections are made via satellite, the sector in which the South African businessman seeks to compete with CFE TEIT, that is, just over 162,000 connections are made through this means.
The price of satellite internet packages is one of the areas of opportunity for Starlink to compete against companies such as Hughes, StarGo and Viasat, firms that have had a presence in the country for more than a decade. The commercial offer of satellite internet in the country starts at 999 pesos per month (about $58), depending on the operator, and most of these plans include a specific number of gigabytes (GB) to download content.
However, Musk’s entry into the telecommunications scene is seen as good news. Jorge Bravo, president of the Mexican Association for the Right to Information (Amedi), says in an interview that Starlink’s entry into Latin America and Mexico has triggered the importance of the satellite industry, making it more visible. “The greatest advantage it offers to governments, in this case CFE Telecom, is the connection speed due to its constellation of low-orbit satellites,” he comments.
The figure of the tycoon, without a doubt, is also an incentive for the development of this business. “It is striking that Starlink does not have a physical presence in the countries, but it obtains concessions and wins contracts,” Bravo details. “There is no doubt that satellites are a complementary technology to terrestrial, 5G networks and essential to bring connectivity to rural, remote areas or in emergency situations such as Hurricane Otis,” complements the also UNAM academic.
Although the satellite connectivity industry is still incipient in the country and can be developed by Elon Musk, the president of Amedi highlights that the Mexican State must pay attention to the development of this model. “Connectivity policy must contemplate the convergence of technologies and Starlink is taking advantage of it, but the satellite industry must not fall into the temptation of governments subsidizing its business model,” he points out.
Musk sees Mexico as a fertile territory for his businesses. In March, Tesla announced that Nuevo León would be the headquarters of its new electric car megaplant with an investment of 5 billion dollars. However, months later, the firm has still not started the works or laid the first stone, in addition to demanding that the Government of Nuevo León provide a series of energy and water support infrastructure to be able to start this plant.
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