Amazon.com's (AMZN.US) acquisition of Globalstar (GSAT.US) could ultimately benefit one of its primary hardware competitors, Apple (AAPL.US). The $11.6 billion deal, announced on Tuesday, will provide Amazon with a satellite network, accelerating its strategy to deliver internet services directly to devices. The e-commerce giant has also pledged to use its Leo satellite system to support Apple's emergency messaging service, filling a role currently handled by Globalstar. If the transaction proceeds, Apple will gain a well-funded and ambitious partner in the satellite communications sector, aiding the iPhone maker in expanding its services within an increasingly vital market.
Apple issued an unusual statement of support for the external technology deal, highlighting its "strong track record" of collaboration with Amazon's infrastructure services, including the e-commerce giant's cloud computing offerings. Apple's Marketing Chief, Greg Joswiak, stated, "We look forward to building on this partnership with Amazon's Leo. This will ensure our users can continue to access critical satellite features they rely on." Apple has spent years developing its satellite capabilities but remains in a catch-up phase compared to some industry players. In 2022, the iPhone manufacturer launched a suite of satellite-connected services, enabling features like offline messaging and emergency SOS calls in areas without cellular coverage. To achieve this, Apple partnered with the 35-year-old low-earth orbit satellite operator Globalstar, also providing funding and acquiring approximately a 20% stake in the company.
Despite Apple's early start in consumer-facing satellite services, the industry landscape has shifted rapidly. Elon Musk's SpaceX has established dominance in satellite-based internet, offering technology far exceeding Globalstar's capabilities, including faster speeds, broader coverage, and support for voice and data. SpaceX has also partnered with the second-largest U.S. wireless carrier, T-Mobile US Inc. (TMUS.US), making it easier for devices like the iPhone to connect to its network without relying on Apple's proprietary features. Other major carriers, such as AT&T Inc. (T.US) and Verizon Communications Inc. (VZ.US), have launched their own satellite services, providing iPhone users with more alternatives. This raises a significant question for Apple: what is the value of operating its own satellite network when superior, nearly maintenance-free options are emerging?
Amazon, with its substantial resources and ambition to build its Leo satellite service as a primary competitor to SpaceX's Starlink, is changing the equation. Now, instead of continuing to fund Globalstar, Apple can connect to an expanding satellite constellation, helping its own satellite services better compete. Roger Entner, an analyst at Recon Analytics, stated that Apple wants to partner with "a big, well-known, well-capitalized player that is not SpaceX." He noted that while there were past doubts about Amazon's seriousness regarding its satellite business, "they are putting a lot of money on the table now—that's serious."
Naturally, the satellite industry is fraught with uncertainty, and Amazon is particularly known for adjusting its product strategies. Apple may ultimately decide that its proprietary satellite features are not worth maintaining. Furthermore, Apple and Amazon compete in several markets, including digital assistants, smart home technology, and even TV streaming services. For now, however, both tech giants are actively maneuvering to capture a larger share of the satellite market. Amazon stated on Tuesday that it plans to launch a direct-to-device satellite network by 2028, meaning the Seattle-based company will offer global high-speed connectivity, thereby supporting Apple's products. Apple is also preparing a new set of satellite features. Last year, reports indicated the company is developing satellite-based mapping services, image messaging capabilities, and functionality allowing third-party apps to access its satellite network.
One unresolved question is whether Apple will continue to offer its satellite services for free. This will depend on the fees Amazon ultimately charges Apple for Leo access, and the iPhone manufacturer may pass these costs on to users.
