By Danielle Ecuyer<\/p>\n
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SpaceX’s IPO has changed everything<\/h2>\n
Disruption is omnipresent across economies and markets as the pace of technological innovation accelerates, increasing both real and perceived threats to incumbent business models.<\/p>\n
In the telecommunications industry, perception is often reality. Irrespective of when the technology ultimately arrives, markets frequently price the narrative long before the earnings impact emerges.<\/p>\n
As highlighted in a recent presentation to the Australian Shareholders Association, Pimco proposes the overarching investment theme for the modern era is “Rupture and Resilience”<\/strong><\/em>, underpinned by an estimated US$14trn in capital expenditure across AI, Energy, Defence, Reshoring and Supply Chains.<\/p>\n Arguably, space and its adjacent infrastructure spending should also be included.<\/p>\n The largest IPO in history, Elon Musk’s SpaceX has brought one of the world’s biggest disruptors into sharper focus while injecting much-needed capital into the business.<\/p>\n Put simply, Morgan Stanley believes SpaceX’s strategic vision extends well beyond satellite launch services into global connectivity, AI models and digital infrastructure.<\/p>\n Leaving aside valuations and the mind-boggling scope of Musk’s ambitions, the broker forecasts Starlink’s broadband connectivity revenue will grow at a CAGR of more than 55% to US$97bn by 2030 from US$10.8bn in 2025.<\/p>\n Against this backdrop, Australian analysts have started to examine the implications for domestic telecommunications operators and providers.<\/p>\n For investors, the story surrounding Australia’s telcos is as much about perception as it is about reality.<\/p>\n The risk of disruption, first highlighted by Morgan Stanley and increasingly echoed by others, has implications not only for future earnings but also the valuation multiples investors are prepared to pay.<\/p>\n Arguably, Australia represents an attractive market given its vast geography, low population density and relatively high average revenue per user generated from both mobile and broadband services.<\/p>\n According to ACCC data at the end of March 2026, Starlink had around 552,000 Australian subscribers, representing approximately 5% of its global subscriber base as disclosed in the prospectus.<\/p>\n This compares with around 297,000 subscribers at the start of 2025 and 375,000 by mid-2025.<\/p>\n For this article, the focus is on Aussie Broadband<\/em> ((ABB)).<\/p>\n For more on Telstra Group<\/em> ((TLS)) see the latest from FNArena editor Rudi Filapek-Vandyck in Telstra’s Premium Under Scrutiny<\/u> (https:\/\/fnarena.com\/index.php\/2026\/07\/15\/rudis-view-telstras-premium-under-scrutiny\/<\/a> and In Brief: Telstra Group, Duratec, South32<\/u> (https:\/\/fnarena.com\/index.php\/2026\/07\/10\/in-brief-telstra-group-duratec-south32\/<\/a>)<\/p>\n Near-term earnings for incumbent telcos are unlikely to be materially impacted in FY26 or FY27 is the general proposition from analysts around Starlink’s ambitions.<\/p>\n FY28, however, is expected to become increasingly relevant as the next generation of Starlink satellites becomes more capable.<\/p>\n Focusing on the near term, Jarden highlights its recent cautious stance on Aussie Broadband due to an expected slowdown in residential subscriber growth against a much larger customer base, a view the broker believes has proven prescient.<\/p>\n With management reiterating FY26 EBITDA guidance at the midpoint of its $162m-$167m range, the analyst believes FY26 earnings are now largely de-risked.<\/p>\n Following the circa -20% retracement in the share price to around $4.70, Jarden believes residential softness is now reflected in market expectations. The likelihood of a negative surprise at the FY26 result in August has therefore diminished.<\/p>\n Conversely, upside risks to the FY27 and FY28 outlook remain underappreciated. The analyst believes underlying cost growth, excluding acquisitions, will remain below CPI, allowing Aussie Broadband to deliver organic earnings growth above consensus forecasts even if residential subscriber growth moderates.<\/p>\n Strategically, the company has transformed itself from an organic residential challenger into a larger, multi-channel telecommunications platform.<\/p>\n Jarden’s earnings forecasts sit around 2% above consensus through FY27, incorporating completion of the AGL subscribers migration in 2Q27, representing around 210,000 NBN broadband subscribers.<\/p>\n Residential margins are expected to remain broadly flat on an annualised basis despite approximately 3.5% inflation in NBN cost of goods sold. Subscriber growth of around 35,000 is forecast, although the larger customer base is expected to temper percentage growth.<\/p>\n Ord Minnett notes the ACCC’s March NBN wholesale market report showed Aussie Broadband’s NBN market share increased to 9.09% from 8.77% in December. By comparison, the combined market share of the four traditional telcos\u2014Telstra, Optus, TPG and Vocus\u2014declined to 75.3% from 78.8%.<\/p>\n Market share within the fibre-to-the-premises (FTTP) segment increased to 11.5% in March from 10.7% in December, while the proportion of customers taking plans of 100Mbps or faster rose to 68%, compared with NBN coverage of 43.7%.<\/p>\n Within Mobile & Telephony, Jarden expects subscriber growth to accelerate as churn normalises, forecasting approximately 44,000 net subscriber additions in FY27.<\/p>\n While the improving near-term outlook prompted Jarden to upgrade its recommendation, the broker also adds the longer-term competitive threat posed by SpaceX cannot be ignored.<\/p>\n SpaceX’s ambition to move beyond servicing remote areas and into suburban and urban markets remains achievable but is dependent on the rollout of its next-generation V3 satellites.<\/p>\n The existing Starlink service remains competitive in regional and remote areas but cannot currently match the reliability and speeds of premium NBN connections, which can deliver up to 1,000Mbps with very low latency.<\/p>\n Satellite internet is therefore more likely to attract customers using older and slower broadband technologies, including Fibre to the Node (FTTN), Fibre to the Curb (FTTC), Fibre to the Building (FTTB) and Fixed Wireless, which are generally less reliable and slower than Fibre to the Premises (FTTP) and Hybrid Fibre Coaxial (HFC).<\/p>\n For Aussie Broadband, Jarden notes this matters because the company has greater exposure to these older technologies than some of its peers.<\/p>\n Offsetting some of this risk, however, NBN Co continues to upgrade its legacy copper network to full fibre while improving HFC performance. As a result, Aussie Broadband’s exposure to these older technologies is gradually shrinking, providing an increasing degree of protection against long-term satellite disruption.<\/p>\n Jarden concludes SpaceX represents a genuine long-term competitive threat, but one that is unlikely to materially affect FY28 earnings expectations.<\/p>\n Accordingly, with the stock trading on less than 10-times FY28 earnings and expected EPS growth of more than 30% CAGR, its valuation appears attractive.<\/p>\n Jarden upgrades Aussie Broadband to Overweight from Neutral with an unchanged $5.50 target price.<\/p>\n See also FNArena’s recent update, Aussie Broadband’s Scale-Up Potential<\/u> (https:\/\/fnarena.com\/index.php\/2026\/06\/18\/aussie-broadbands-scale-up-potential\/<\/a>)<\/p>\n Morgan Stanley’s deep dive into the potential impact of Starlink’s satellite broadband points to a greater long-term risk to NBN subscriber growth than to broadband average revenue per user (ARPU) across the domestic telecommunications sector.<\/p>\n The broker believes subscriber growth, rather than pricing, is likely to be the first casualty should satellite technology become a viable alternative to fixed broadband in suburban and urban markets.<\/p>\n The next-generation V3 satellites currently under development are targeting downlink capacity of 1,024Gbps, around ten times the capacity of the existing V2 Mini satellites.<\/p>\n This increased capacity is viewed as a key enabler for Starlink’s longer-term ambition of expanding beyond regional and remote Australia into higher-density metropolitan markets.<\/p>\n For Aussie Broadband, Morgan Stanley estimates a -5% reduction in NBN subscriber growth between FY27 and FY30 would reduce forecast FY30 EPS by around -8.5%.<\/p>\n Put another way, forecast EPS CAGR over FY27-FY30 would slow to around 9% from 13%.<\/p>\n Should this scenario materialise, Morgan Stanley believes investors would also be likely to assign a lower valuation multiple to the stock, reflecting the softer long-term earnings growth outlook.<\/p>\n While the earnings impact appears manageable in isolation, the valuation implications could prove more significant, if investors begin pricing slower structural growth.<\/p>\n Morgan Stanley therefore lowers its target price to $6.00 from $6.30 while retaining an Overweight rating. Yesterday, the shares closed at $4.90.<\/p>\n Ord Minnett also remains constructive, retaining a Buy rating while trimming its target price to $6.30 from $6.37.<\/p>\n This broker continues to point to Aussie Broadband’s ability to gain NBN market share, particularly in higher-value Fibre to the Premises (FTTP) customers, alongside improving momentum across its Mobile & Telephony business.<\/p>\n FNArena’s daily monitored brokers have a consensus target price of $6.01, underpinned by five Buy-equivalent ratings.<\/p>\n Ultimately, the debate surrounding Aussie Broadband is not whether satellite technology will become more competitive. Most analysts agree it will.<\/p>\n The bigger question is whether investors have begun pricing a disruption that may still be several years away.<\/p>\n For now, consensus suggests the market is focusing on a long-term competitive threat while near-term fundamentals continue to improve.<\/p>\n In that respect, perception may once again be moving faster than reality.<\/p>\n Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)<\/a>” – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\nWhat are the risks and what is already discounted?<\/h2>\n
A deeper dive into potential Starlink disruption<\/h2>\n