The Space War is Heating Up: Amazon Just Bought a Low-Earth Orbit Satellite Company. Could it Challenge SpaceX's Starlink?

Key Points

Amazon recently announced its acquisition of Globalstar for over $11.5 billion, or roughly $90 per share.

Amazon has been attempting to build a low-Earth orbit satellite network but has fallen behind schedule.

SpaceX's Starlink remains a leader in the sector, but competition is growing.

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The upcoming SpaceX initial public offering is expected to be enormous, potentially valuing the company at $2 trillion. Founded by Elon Musk, SpaceX is viewed as a pioneer of the space economy.

But that doesn't mean it won't have competition. Amazon (NASDAQ: AMZN) just made a splash, announcing today that it will acquire Globalstar for over $11.5 billion, valuing the company at about $90 per share.

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As of this writing, Globalstar shares had surged nearly 10% but were still trading around $80 per share. The deal will still require approval from the U.S. Federal Communications Commission (FCC), although Amazon hopes to close the acquisition in 2027.

Globalstar operates 24 low-Earth orbit satellites to provide phone and data services in areas underserved by traditional wireless and cable networks. The company also holds spectrum licenses, which grant it the authority to use certain radio frequencies for wireless communication, such as television and radio.

Globalstar recently partnered with Apple to enable users to send distressed messages and connect with emergency providers even if there is no cell service.

Per the deal, Amazon will acquire all of Globalstar's satellite operations, infrastructure, and assets, as well as some of its spectrum licenses. The bigger plan is to run the Globalstar fleet of satellites alongside Amazon's existing fleet, called Leo.

Can Amazon challenge SpaceX?

SpaceX has a significant head start

So far, Amazon's Leo network has over 200 satellites in space.

However, the FCC had set a deadline for Amazon to deploy 1,600 satellites by July of this year. Amazon has asked for an extension, requesting the deadline to be pushed out by two years to July 2028.

Amazon ultimately plans to have 3,236 low-Earth satellites and integrate Leo with Amazon Web Services, so clients can move data between the two networks for storage, analytics, and artificial intelligence purposes.

Amazon hopes to launch Leo later this year. CEO Andy Jassy recently said that it already has commitments from customers, such as Delta, to begin using Leo for Wi-Fi on hundreds of its planes starting in 2028.

Still, Amazon remains very far behind Starlink, which has close to 10,000 satellites up and running in space, with plans to eventually have 42,000 satellites one day. Starlink also has 9 million users.

Given this and the fact that Amazon seems to be running behind schedule, I don't see Leo as a real challenge to Starlink yet. However, I think it raises an interesting point for potential future SpaceX investors: there is likely to be significant competition.

That's something to consider, given the massive valuation that SpaceX is expected to debut at when it goes public.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Apple and is short shares of Apple. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.