LEO satellite direct-to-device connectivity and its implications for telecom operators and RAN suppliers Report Interpretation

Overview

This industry deep dive examines whether LEO satellite direct-to-device connectivity can disrupt telecom operators and radio-access-network suppliers. ABG Sundal Collier concludes that satellites have a compelling role in uneconomic coverage areas, but their inherent capacity, indoor-performance and spectrum constraints leave terrestrial networks dominant; the material strategic risk would arise if SpaceX builds a hybrid standalone mobile network.

Core views

The report frames LEO direct-to-device connectivity as a transition from niche satellite use to a mainstream telecom coverage layer. More than 95% of the global population has cellular coverage, but roughly 70% of landmass remains outside terrestrial coverage. Extending mobile networks into remote areas often produces poor returns because rural sites are expensive while incremental users have low ARPU. LEO constellations reverse the marginal-cost equation: they require large upfront investment but can add geographic coverage at near-zero marginal cost per additional square kilometre. Falling launch costs, smaller phased-array antennas, operator partnerships and 3GPP Release 17 non-terrestrial-network standards have made the model more viable. ABG Sundal Collier distinguishes two LEO business models. In direct-to-consumer or enterprise services, satellite providers sell terminals and subscriptions directly, retaining the customer relationship but incurring higher customer-acquisition costs. In wholesale partnerships, satellites use MNO spectrum as a “base station in the sky,” while the MNO retains billing, customers, spectrum and its core network. The report considers the latter model the present mainstream and potentially complementary for operators. It can improve rural coverage without forcing low-return terrestrial deployment, while operators can monetise premium-plan inclusion, add-ons, temporary connectivity, public-safety services and potentially lower churn. A cited Viasat survey found around 50% of consumers would consider changing operator for satellite access. The central constraint is capacity rather than coverage. A satellite beam covers a large area and shares limited, power-constrained bandwidth among users, whereas terrestrial cells are much smaller and can be densified. Satellite-to-handset services initially provide 2-7Mbps, suitable for messaging, voice and narrowband data; terrestrial mobile users in the US experienced average download speeds of 46-159Mbps in 2024. The report compares terrestrial 5G speeds above 100Mbps and latency below 10ms with satellite D2D speeds below 20Mbps and 20-40ms latency. Nokia estimates satellite D2D capacity per square kilometre is more than 100 times lower than rural 5G and more than 50,000 times below urban 5G. Aetha benchmarking indicates that even a 42,000-satellite Starlink fleet would remain far below terrestrial 5G capacity density. The institution therefore treats the gap as structural, driven by beam size and spectrum rather than merely constellation maturity. Indoor use further limits a mass-market mobile proposition. About 80% of mobile traffic is generated indoors, but the report says satellite links retain only around 12dB of margin for penetration while walls and modern windows typically absorb 20-30dB. Ofcom data cited in the report place roughly 45% of monthly traffic in urban areas, 37% in suburban areas and 18% in rural areas, precisely where satellite capacity and building penetration are least competitive. Video represents around 70% of mobile traffic, reinforcing the conclusion that D2D is best suited to outdoor, low-data-rate coverage in remote areas rather than broadband substitution. Although Starlink is targeting 150Mbps peak speed per user versus current 4Mbps, the report argues this does not resolve shared-area capacity constraints; terrestrial networks will also advance with 6G. The competitive landscape nonetheless gives Starlink strategic importance. As of Q2 2026, it had more than 12m users in over 150 countries and around 11,000 satellites, versus a target of approximately 42,000. Starlink-related revenue grew to USD 11bn in 2025 from USD 4bn in 2023. SpaceX's reusable launch economics give it a major cost advantage: Falcon 9 marginal cost is estimated at about USD 20m per launch versus a USD 67m commercial rate, and Starlink satellite unit cost is estimated at USD 1-2m. SpaceX's acquisition of EchoStar spectrum for roughly USD 20bn is strategically significant because it provides cellular-grade spectrum that ordinary smartphones can use, unlike typical MSS spectrum. This could eventually let Starlink move from wholesale partnerships to direct mobile competition, though the report stresses that spectrum is costly and high-usage mobile customers would still require substantial terrestrial infrastructure. The report also assesses Amazon Leo and AST SpaceMobile. Amazon Leo has around 400 satellites and targets about 5,100; it has shifted toward enterprise applications linked to AWS and announced a USD 11.6bn Globalstar acquisition due to close in 2027. AST SpaceMobile uses large-aperture Block 2 BlueBird satellites, reports download speeds of up to 120Mbps, partners with major US operators on revenue-sharing terms, and is expected by FactSet estimates to reach EBITDA breakeven in 2027. The sector's capital intensity and regulatory complexity favour scale, and the report expects further consolidation that could ultimately strengthen wholesale pricing power among a small number of integrated players. For Nordic telecom operators, ABG Sundal Collier sees limited near- to medium-term earnings exposure. Extensive 4G/5G coverage, high fibre penetration, high data use and relatively low mobile pricing constrain the addressable market relative to the region's geography. Rural broadband and FWA are the clearest exposed segments because satellite is a closer substitute where terrestrial deployment is costly; fibre is protected by capacity and reliability once deployed, and conventional mobile by terrestrial capacity and existing coverage. In Sweden, FWA represented around 420,000 subscriptions at year-end 2025, or about 10% of the approximately 4.3m fixed-broadband base; the report estimates that at most around 10% of Tele2's and Telia's Swedish consumer-connectivity revenue has the clearest direct Starlink overlap. In Finland, high-speed 5G covers 93% of households, 89% of mobile subscriptions include unlimited data and operator ARPU is only around EUR 20-25 per month. In Norway, 99.3% of households had access to at least 100Mbps fixed broadband in 2025, 96.3% had gigabit access, and fibre reached 92.1% of households. The report's bearish scenario is not better satellite technology alone, but SpaceX acquiring enough terrestrial spectrum and infrastructure to own the customer relationship. That could create a new infrastructure-based competitor, raise spectrum costs for incumbents and affect valuation multiples before earnings. Yet the report regards it as a long-term tail risk because standalone entry would require terrestrial capacity, high investment and overcoming Nordic convergence bundles and established customer relationships. Over the next 5-10 years, competitive intensity, pricing discipline, churn, execution and capex discipline are expected to remain far more important drivers of Nordic telecom EBITDA and free cash flow. For RAN suppliers, the conclusion is broadly neutral. Satellite can reduce low-return, coverage-driven rural RAN investment, but such sites make up only a small share of global RAN spending, which is primarily driven by capacity in populated areas. Dell'Oro expects terrestrial networks to carry over 98% of mobile traffic by 2030, while the RAN market is estimated to grow at roughly 1% CAGR through 2030. Faster D2D adoption or physical-AI demand could exceed expectations, but the report says a material effect on RAN investment would require a substantial shift of mobile subscribers to satellite. A new spectrum-owning competitor could instead pressure capex through market structure: GSMA data cited show European markets with three or fewer operators spend 48% more capex per connection than markets with four or more players. The report retains HOLD on Ericsson, citing DRAM headwinds and a lukewarm US outlook despite an estimated 8% cash yield in 2026-27, and BUY on Nokia, supported by rising AI and Cloud sales mix and a 16x 2027e adjusted EV/EBITA valuation.

Analysis framework

The report starts with the coverage economics of LEO satellites, separates wholesale and direct retail business models, and then tests disruption claims against satellite capacity, indoor performance, spectrum access and cost constraints. It compares leading constellations and assesses implications by Nordic connectivity segment, before linking likely traffic and competitive outcomes to RAN spending and the retained stock views.

Methodology notes

• Industry AnalysisSupply-demand framework

  Coverage-versus-capacity comparison

  The report contrasts satellite supply of geographic coverage with terrestrial networks' superior capacity density to determine which telecom segments can realistically be disrupted.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Satellite-to-MNO-to-RAN transmission analysis

  The analysis follows how satellite services affect operator spectrum, customer ownership, rural capex and ultimately demand for RAN equipment.

• Event-Driven and Behavioral FinanceExpectation Gap and Expectation Management

  Valuation risk preceding earnings risk

  The report explains that credible SpaceX standalone-mobile ambitions could alter investors' view of telecom entry barriers and valuation multiples before financial results change.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Elisa

  Nordic operator retained at BUY; satellite does not change the institution's near-term earnings or FCF view.

  Strengths

  Attractive valuation and scope for improving operational momentum.

  Comparison

  Preferred operator view alongside Tele2 over Telia.

  Risks

  Satellite competition is a long-term valuation tail risk, while Finnish competitive conditions remain a nearer-term factor.

• Tele2

  Nordic operator retained at HOLD and preferred over Telia.

  Strengths

  Solid cash generation and cost execution.

  Weaknesses

  Exposure to Swedish rural broadband and FWA overlap.

  Comparison

  Preferred over Telia, which remains SELL.

  Risks

  At most ~10% of Tele2's Swedish consumer-connectivity revenue is estimated to be in the clearest direct Starlink-overlap segment.

• Telia

  Nordic operator retained at SELL.

  Strengths

  Improved operational performance is increasingly reflected in its FCF and dividend-yield valuation.

  Weaknesses

  Less preferred than Tele2.

  Comparison

  Tele2 is preferred over Telia.

  Risks

  Swedish rural broadband and FWA are the clearest direct satellite-overlap areas.

• Nokia

  RAN supplier retained at BUY; D2D is assessed as broadly neutral for RAN demand.

  Strengths

  Rising AI and Cloud revenue mix, expected at 20% of sales in 2028e versus 9% in Q2; comparatively attractive 16x 2027e adjusted EV/EBITA valuation.

  Comparison

  Considered less exposed to mobile-market trends than Ericsson because of data-centre and optical exposure.

  Risks

  A more competitive telecom market could weigh on operator capex, although the report does not see material near-term RAN displacement.

• Ericsson

  RAN supplier retained at HOLD; direct D2D-driven RAN displacement is not expected to be significant in coming years.

  Strengths

  Estimated ~75% share of the US market following the AT&T contract and an attractive 8% 2026e-27e cash yield.

  Weaknesses

  DRAM headwinds and a lukewarm US outlook; higher mobile revenue exposure than Nokia.

  Comparison

  More exposed than Nokia to mobile-market dynamics.

  Risks

  Spectrum-cost inflation or intensifying US competition could affect operator capex and Ericsson's profitable US exposure.

Key data

• Uncovered global landmass~70%The report identifies this as the geographic coverage opportunity for satellite D2D.
• Starlink scale12m users; ~11k satellites; 150+ countries as of Q2 2026Starlink targets approximately 42,000 satellites.
• Starlink revenueUSD 11bn in 2025Up from USD 4bn in 2023.
• EchoStar spectrum acquisition~USD 20bnThe report views this as strategically important for potential direct mobile competition.
• Satellite D2D capacity versus terrestrial 5GOver 100x lower than rural 5G; over 50,000x lower than urban 5GNokia benchmarking cited by the report.
• Terrestrial share of mobile traffic in 2030>98%Dell'Oro expectation cited by the report.
• Swedish FWA base~420k subscriptions at YE 2025About 10% of Sweden's ~4.3m fixed-broadband base.
• RAN market growth~1% CAGR through 2030The report says D2D is unlikely to materially alter this outlook.

Impact & implications

ABG Sundal Collier considers D2D initially complementary to MNOs because it can extend coverage without uneconomic rural network build-out. The most exposed Nordic revenue pools are rural broadband and FWA, while fibre and conventional mobile remain protected. The key strategic implication is that SpaceX's terrestrial-spectrum ownership and infrastructure build-out, rather than satellite coverage improvements alone, would signal a shift toward genuine competitive risk and could affect valuations before earnings.

Risks

• SpaceX could acquire enough terrestrial spectrum and infrastructure to become a standalone mobile competitor rather than an MNO coverage partner.
• Satellite operators' participation in spectrum markets could raise spectrum costs for incumbent operators.
• Rural broadband and FWA face the clearest substitution risk if satellite pricing and performance become competitive.
• Faster-than-expected D2D adoption or uptake of physical-AI applications could alter mobile-traffic and RAN-spending assumptions.
• Satellite operators face low ARPU, high customer-acquisition costs, expensive spectrum and five-to-seven-year satellite replacement cycles.

What to watch

• Whether SpaceX moves beyond partnerships by acquiring additional terrestrial spectrum and building terrestrial infrastructure.
• Evidence that Starlink can improve urban capacity, indoor performance and scalable direct retail mobile service.
• Satellite uptake in rural broadband and FWA, particularly in Sweden and other Nordic rural markets.
• Changes in Nordic pricing, churn, promotional intensity, market-share ambitions and capex discipline, which the report considers more important near-term earnings drivers.
• Potential satellite-sector consolidation and resulting changes in wholesale pricing power.
• Whether D2D traffic adoption materially challenges the expectation that terrestrial networks carry more than 98% of mobile traffic in 2030.