It is not a war games novel nor an adventurous space race, but a more prosaic business question. Whoever offers the product with the best quality/price ratio takes everything because governments, in every part of the world, have debt management problems and, therefore, there is a tendency to save even on strategic investments such as those in Aerospace & Defense. SpaceX’s affair with the Italian government can be summarized in these terms. Leonardo, the majority public defense holding company, however suffered, closing down 0.7% on Piazza Affari after having suffered a fall of more than 4% during the session. Even if the prime minister were not Giorgia Meloni, anyone else in her place would listen to Elon Musk’s proposals and evaluate them with a single criterion: that of convenience. After that, there are political issues and partnerships within the European Union that will impact decisions.
THE COLOSSUS OF ELON
The Space Exploration Technology Corporation (SpaceX for short) is a company founded in 2002 by Elon Musk who, at the time, was only known as the founder of the current PayPal and not as the father of Tesla as well as the buyer of Twitter. The objective is the same that the volcanic Richard Branson, owner of Virgin, will set himself two years later: organize space travel for rich people. Musk, however, has an original idea: producing launch modules (i.e. rockets) internally to lower costs. This unusual choice brings him a fortune: contracts with the US government (i.e. with NASA) to recover space modules or to supply international space stations. From 2008 to today he has collected around 20 billion dollars (19.2 billion euros) from the White House and this has allowed him to further develop the business. Since 2015, in fact, SpaceX has begun launching satellites into orbit with its Falcon rockets, which started in 2019. Here too the idea is a winning one: the Starlink project is based on smaller modules in orbit 550 kilometers from Earth compared to the 36 thousand kilometers of large geostationary satellites. What does it mean? That the signals take less time to be transmitted and, therefore, the delay (in English lag) is practically zero and the competitive advantage is enormous. This solution becomes competitive (and, above all, economical) not only for military communications but also for satellite Internet connections. In 5 years, over 6,400 modules have been launched into orbit and the number of Internet subscribers is sailing towards 3 million. The figures are not yet significant, so much so that perhaps only in 2024 have costs not exceeded revenues. But what matters most is that insiders value SpaceX at a good 350 billion dollars (337 billion euros), which is almost double that of an aerospace giant like General Electric, more than 8 times the European defense champion BAE Systems and more 20 times our Leonardo. The landing on the stock exchange, however, has been postponed.
THE CHALLENGE OF THE UNION
As usual, Brussels woke up a little late from its torpor, but just three weeks ago it gave a notable shock. The EU Commission has signed a 10.6 billion euro contract for the construction of Iris², a constellation of satellites for secure communications. It is the most ambitious European space project of the last decade. The system, which will be operational from 2030, involves the launch of 290 satellites and sees the participation of large private companies in the European aerospace sector through the SpaceRise consortium. The operation involves the three largest European satellite operators: Eutelsat, SES and Hispasat. Alongside them are giants such as Airbus, Thales, Deutsche Telekom and Telespazio (of which 67% is owned by the Italian Leonardo and 33% by Thales). The move prevented Thales, Airbus and Leonardo, irritated by constant delays, from organizing themselves, bypassing governments. Staying out of a sector that can generate revenues and, above all, profits was no longer tolerable. The goal is to create a model that leads to economies of scale, increasing margins. In fact, many of the big European companies are listed and must meet investors’ expectations. Just to give an example, the expected revenues in 2024 of Eutelsat, Ses and Hispasat are just over 4 billion euros, two thirds of the over 6 billion of SpaceX. Leonardo, Thales and the British giant Bae Systems are worth around 80 billion on the stock market, less than a quarter of SpaceX’s current valuation.
THE ITALIAN COMMITMENT
Our country boasts a historic tradition in these industrial sectors, now grouped in Leonardo, led by CEO Roberto Cingolani. And it is precisely the vision of the latter that meant that the industrial plan of last March included a strong focus on the space sector with overall investments of 10 billion euros in the period 2024-2028. In addition to Iris², Leonardo is involved in other EU projects such as the Galileo satellite navigation system and the Copernicus Earth monitoring programme. The research is also well supervised by the government which – with its own and Pnrr funds – has allocated 7.3 billion.
A SIMPLE QUESTION
A reality emerges from this statement of facts. US production capacity, turnover volumes and technology (in some cases more advanced) tip the scales of convenience to the other side of the Atlantic.
As Musk’s Italian alter ego, Andrea Stroppa, pointed out, “all communication systems in European countries use US technologies” such as Microsoft, Apple’s iOS, Google and Oracle. If Italy ever made a choice based on pure economic convenience, it would purchase services from a historic partner and military ally. The story, however, is not yet written. Rome and Brussels can change it.