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Amazon reaches for the stars

Monday 29 July 2019

Portfolio company updates

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Jeff Bezos is proving the sky’s no longer the limit for Amazon as they seek to launch thousands of toaster sized satellites to provide broadband to the world. Some analysts speculate the project could increase Amazon’s valuation by over US$100 billion. Initially the focus will be providing internet access to developing countries.

What is Project Kuiper?

In Amazon’s own words “Project Kuiper is a long-term initiative to launch a constellation of Low Earth Orbit satellites that will provide low-latency, high-speed broadband connectivity to unserved and underserved communities around the world.”

The Kuiper Belt (Pronounced: Kai-per) is a formation of asteroids and dwarf planets sitting just past the orbit of Neptune (the 8th planet from the sun).

Network of satellites

The initial proposal is to launch a network of 3,236 satellites at a cost estimated to be in the billions of dollars. At the recent Amazon re:MARS 2019 conference in Las Vegas, Jeff Bezos commented:

“It’s a very good business for Amazon because it’s a very high capital expenditure undertaking. It’s multiple billions of dollars… Amazon is a large enough company now that we need to do things that, if they work, can actually move the needle.”

Market opportunity

According to a recent Morgan Stanley report on the space industry, the market opportunity is expected to increase to $1 trillion by 2040 from around $350 billion today. Acceleration in growth is being driven by the development of reusable rockets led by SpaceX and Bezos’s Blue Origin. Having reusable rockets dramatically reduces the cost of getting into space making endeavours such as the Kuiper project financially viable.

Summary

Project Kuiper may end up servicing the whole world providing fast reliable bandwidth to people whose economic and social advancement increasingly depends on connectivity. It may well deliver a ubiquitous and stable internet service to Australians before the NBN.

About the Author
Lachlan Hughes, CFA

Lachlan Hughes, CFA

Chief Investment Officer

Lachlan is the CIO, with responsibility for all investment decisions of the Swell Global Portfolio. Previously Lachlan was a Senior Analyst with NovaPort Capital. During his tenure, the team achieved an annual return of 23.56% over the period from 2009 to 2013, outperforming the S&P/ASX Small Ordinaries Accumulation Index by 15.42% and earning the Lonsec Fund Manager of the Year (Rising Star) award in 2012. Prior to that, Lachlan was a corporate lawyer working with King & Wood Mallesons (Sydney), The Bank of New York (London) and Allco Finance Group.

Lachlan earned the right to use the CFA designation granted by the CFA Institute in 2010. His professional qualifications include a Bachelor of Commerce (Finance) and a Bachelor of Laws.

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