SpaceX, led by Elon Musk, is breaking out of the mold of a satellite internet service company. Ahead of the largest initial public offering (IPO) in history, the company is proving its high valuation by winning core projects from the U.S. Department of Defense. A recent megaton-scale contract with the U.S. Space Force and an unprecedented service price increase imposed on the Defense Department are symbolic news demonstrating the shift in SpaceX's standing. Let us examine how SpaceX's foresight in seizing low-orbit space first has become the secret to its formidable competitiveness in the powerful defense sector.
What Is the 3.1 Trillion Won 'SDN Backbone' Deal Shaking the U.S. Space Force?
The U.S. Space Force announced on Nov. 26 that it had signed a contract worth $2.29 billion (about 3.1 trillion won) with SpaceX to build a high-speed, highly secure satellite communications network that will connect military sensors and weapons platforms around the world. The contract was signed under the "Other Transaction Authority (OTA)" method, which is characterized by rapid procurement.
The core of this project is to build the "Space Data Network (SDN) Backbone," a next-generation military satellite communications network based on low Earth orbit (LEO). SpaceX has been given the mission of building a fully operational prototype by the end of 2027.
What is interesting is that this network is distinct from "Starlink," which is used by the general public. The company has decided to fully utilize the technology of "Starshield," SpaceX's government-only service. This military network will function as the core data transmission backbone of "Golden Dome," the U.S. missile defense system.
The SDN Backbone aims to achieve strong security by incorporating high-assurance encryption technology and functions to prevent classified information leaks. It seeks to realize low-latency communications and high-speed data transmission so that high-capacity defense data can be transmitted without interruption. In particular, the focus is on completing a robust military communications network that will not be neutralized under any attack or failure situation in the event of an emergency.
"Major Satellite Service Deals Significantly Strengthen Company Fundamentals"
This kind of defense-sector achievement by SpaceX is seen as having been built on its existing solid partnerships. According to Reuters, SpaceX recently raised the price of the Starlink service it provides to the U.S. Defense Department by five times the previous level. As a result, the usage fee for terminals (antennas) will rise sharply from $5,000 per month to $25,000.
It is a price increase at a profiteering level that would be hard to imagine in a typical B2C market, but the U.S. Defense Department accepted it. SpaceX explained that this is "because the military is using a more advanced and high-level service beyond simple internet connectivity." The assessment is that SpaceX has gained the upper hand in pricing decisions against government agencies as its monopolistic technology dominating space combines with irreplaceable military utility.
Park Jun-kyu, a researcher at Samsung Securities, analyzed that "SpaceX's successive announcements of major satellite service deals targeting the military and corporations are significantly strengthening the company's overall fundamentals."
The government (B2G) and corporate (B2B) markets have low price elasticity because the switching costs are enormous compared with the general consumer (B2C) market. In other words, institutions and corporations tend to prioritize top-level service even if they pay a little more, as long as performance is guaranteed. As a result, SpaceX's connectivity business division, which is dedicated to satellite services, has secured a more stable revenue source, and observations are that its future profitability will also improve dramatically.
SpaceX's dominance is also clearly evident in the private aviation B2B market. Recently, American Airlines, the largest U.S. airline, announced that it would introduce Starlink-based in-flight Wi-Fi service to about 500 of its aircraft. With this, SpaceX has secured three of the four major U.S. airlines (American, United, Delta, Southwest) — American, United, and Southwest — as clients, conquering even the skies.
In the past, when Elon Musk said he would launch thousands of satellites, the world called it a reckless gamble. But that seemingly reckless foresight has now become a massive practical achievement and a powerful entry barrier that no one can challenge. From Wi-Fi infrastructure in the private aviation market to the core backbone network for the U.S. Space Force's next-generation missile defense, SpaceX's connectivity technology has established itself as indispensable infrastructure penetrating the world's skies and defense.
SpaceX, Listing on the 12th, Targets $1.78 Trillion Valuation
SpaceX has raised its target valuation for its record IPO to $1.78 trillion (about 2,700 trillion won). Through an amended registration statement filed on Dec. 3, the company said it plans to raise $75 billion by selling 555.6 million shares at $135 per share. SpaceX also disclosed that it will first invest the proceeds in expanding artificial intelligence (AI) infrastructure, followed by launch vehicle development and the construction of the Starlink satellite internet network in turn. The IPO roadshow begins on the 5th, and SpaceX shares are scheduled to be listed on the Nasdaq market under the ticker symbol "SPCX" on the 12th.
