Investment banks Morgan Stanley and Jarden have downgraded Telstra and several other ASX-listed telecommunications companies, citing fears that Elon Musk’s SpaceX, particularly its Starlink satellite internet service, will attract customers from the concentrated industry. Telstra is Australia’s largest telecommunications provider, offering mobile, internet, and fixed-line services to millions nationwide. Analysts cut share price projections due to concerns over earnings being threatened by new competition.
Morgan Stanley analysts Andrew McLeod and Angela Sutcliffe told clients that SpaceX would be a “genuine disrupter” in the Australian market, urging investors to recognise the threat. They reduced share price targets by up to 10 per cent for Telstra, TPG Telecom, Aussie Broadband, and Spark New Zealand. The bank highlighted Australia as an “attractive market” for Starlink, which had 552,000 Australian subscribers by late last year, following its recent blockbuster initial public offering.
Jarden’s Liam Robertson and Charles Strong also downgraded Telstra to an “underweight” rating from “neutral.” They warned that Telstra’s significant competitive advantage from its expansive mobile coverage is being eroded by the rise of satellite direct-to-device connectivity, the technology Starlink uses. Government plans requiring all major carriers to enhance coverage, partly via satellite, are also expected to impact Telstra, potentially shrinking its earnings before interest, taxes, depreciation, and amortisation by up to $1.1 billion.
Despite these bearish assessments, some market observers caution against overestimating Starlink’s immediate disruptive power. ClearBridge Investments’ Patrick Potts noted technical hurdles and Telstra’s deeply embedded network dominance. Pengana Capital Group’s William Dougall added that satellite technology is best suited for outdoor areas, contrasting with urban customer bases, and pointed to existing partnerships where local telcos like Telstra and Optus are already utilising Starlink’s satellite technology.
