The third time was the charm.
Twice in the past week, United Launch Alliance (ULA) had to "scrub" attempts to launch a new ViaSat-3 F2 communications satellite for customer Viasat (VSAT +0.78%), both times due to technical issues with oxygen valves on the ULA Atlas V launch vehicle. On Thursday night, Nov. 13, ULA finally succeeded on its third attempt, and got the satellite into orbit.
Success put the second of a constellation of three massive 7-ton ViaSat-3 satellites into geostationary orbit roughly 22,000 miles from Earth. It also helps to repair the disaster that struck Viasat in 2023, when the first of these giant satellites suffered an antenna malfunction that rendered that satellite largely inoperable, and turned this space stock's $700 million investment in building and launching the satellite into a loss.
This disaster illustrated the danger of Viasat's business model, putting all of its space eggs in just two or three baskets, such that the loss of any one not only cost the company its investment, but hobbled the revenue stream Viasat expected to collect from using the satellite over its 15-year lifespan. But as it turns out, Viasat's lessons don't end there.
The more I learn about Viasat's satellites, the more I become convinced this company simply cannot compete with SpaceX.
Image source: Getty Images.
Space math
Viasat first began building its ViaSat-3 line of satellites back in 2016. But over time, as inflation relentlessly eats away at the value of the U.S. dollar, the cost of each satellite has only gone up -- to the point that a ViaSat-3 F2 probably costs as much as 36% more than ViaSat-3 original recipe.
How much exactly does the ViaSat-3 F2 cost? A little research reveals that Viasat paid Boeing (BA 0.06%) $700 million to build, and ULA $150 million to launch, the first ViaSat-3 satellite. Estimates run as high as $800 million to build the second satellite, though, plus $150 million more to launch it -- perhaps $950 million in total.
Now, Viasat obviously thought the money was worth it, as the new satellite is expected to boast one entire terabyte of data throughput per second (1 Tbps) once it becomes operational, and provide coverage of the entire Western Hemisphere, supplementing coverage from the crippled ViaSat-3 F1.
1 Tbps sounds like a lot of internet capacity. But it's really only enough bandwidth to support about 1,000 simultaneous users operating at gigabyte-per-second speeds. Or 10,000 customers at slower 100 Mbps speeds. More importantly, when compared to other satellite offerings -- from SpaceX in particular -- ViaSat-3 really isn't that speedy at all.
SpaceX vs. Viasat
Take the newest generation of SpaceX's Starlink satellites for example, dubbed V3. Intended for launch in SpaceX's new Starship launch vehicle, each V3 Starlink will boast a similar 1 Tbps downlink capacity. But SpaceX will be launching these birds 60 at a time aboard Starship.
This means each SpaceX Starlink mission using Starship will put 60 times more internet capacity in orbit than any given ViaSat-3 launch. What's more, in contrast to Viasat paying ULA $150 million or so to launch its ViaSat-3, SpaceX will pay itself for Starlink launches. And Elon Musk estimates the cost of each such launch using Starship will be no more than $10 million.
The math here is simple: For the same $150 million Viasat pays to launch a single ViaSat-3 with 1 Tbps of capacity, SpaceX will be able to launch 900 Starlinks, providing 900 Tbps of internet capacity.
And the math only gets worse from there. Instead of the $800 million (or even just $700 million) cost to pay Boeing to build it a ViaSat-3, SpaceX says its own construction cost for each V3 Starlink will be just $1.2 million. That's not a 900-fold difference in price, granted, but it's still pretty big -- a disturbing 666-fold difference in construction cost.
Oh, and instead of Viasat needing to wait years for delivery of a single satellite from Boeing, SpaceX plans to build V3 Starlinks at the rate of 10,000 per year.
NASDAQ: VSAT
Key Data Points
The upshot for investors
Now that Viasat has reported its third-quarter earnings (last week), we know the company is still losing money -- nearly $118 million in losses so far this year, putting it on track to lose money for the third year in a row, and for the fourth time in the last five years, according to data from S&P Global Market Intelligence.
As Viasat faces the insuperable economics of trying to compete with SpaceX satellites, I fear there's little reason for investors to want to own Viasat stock anymore.
