Starlink’s Rise in Mexico: How Government Contracts Fuel Growth

According to Wired, Starlink, Elon Musk’s satellite internet service, rapidly expands in Mexico. It is bolstered by significant government contracts under President Andrés Manuel López Obrador’s administration, positioning itself as a dominant force in the country’s telecommunications sector.

Starlink, the satellite internet service developed by Elon Musk’s SpaceX, has rapidly become a formidable player in Mexico’s telecommunications market. Starlink’s growth in Mexico has been particularly striking, with operations spanning 75 countries and over three million global customers. As of 2024, the service has attracted more than 150,000 customers in the country, a notable feat considering the nascent state of the satellite internet market there. According to data from Mexico’s Federal Telecommunications Institute (IFT), this figure represents a 0.32% share of the fixed satellite internet market, outpacing rivals such as HughesNet, GlobalSat, and StarGroup.

A recent report by Wired highlights how lucrative government contracts have significantly bolstered Starlink’s success in Mexico, making it a key player in the country’s ongoing efforts to improve connectivity in underserved areas. However, this rapid expansion also raises questions about the future of competition in Mexico’s telecommunications industry and the long-term implications of Starlink’s dominance.

The Backbone of Starlink’s Success

The foundation of Starlink’s rapid growth in Mexico can be traced to two substantial contracts awarded by the Mexican government under President Andrés Manuel López Obrador. In November 2023, Starlink secured contracts through a public bidding with the Comisión Federal de Electricidad (CFE), the state-owned electricity company. These contracts, worth a combined total of 3.33 billion pesos, are part of the federal Telecomunicaciones e Internet para Todos (CFE-TEIT) program, which aims to provide free internet access to remote and underserved areas nationwide.

The first contract, valued between 778 million and 1.56 billion pesos, focuses on expanding internet coverage to remote regions where traditional broadband services are either unavailable or prohibitively expensive. The second contract, worth between 887 million and 1.77 billion pesos, aims to increase cellular coverage in disconnected communities. Both agreements are set to run until December 2026, positioning Starlink as a critical partner in Mexico’s digital transformation efforts.

Carlos Emiliano Calderón, the coordinator of the National Digital Strategy for the Presidency of Mexico, underscored the importance of these contracts, stating to Wired, “Starlink’s service is among the most advanced available and has been contracted to accelerate connectivity across the entire country, as promised.”

While government contracts have played a crucial role in Starlink’s growth, the company has also made significant inroads into Mexico’s private sector. In a strategic move, Starlink partnered with Telefónica Global Solutions (TGS) to distribute its satellite internet services to businesses in Mexico and Latin America. This alliance, which also covers Peru, Colombia, Chile, Brazil, and Spain, aims to offer next-generation connectivity solutions to sectors such as retail and banking, which increasingly rely on robust and reliable internet services.

Julio Beamonte, CEO of Telefónica Global Solutions, highlighted the transformative potential of satellite internet in the region. “The satellite industry is undergoing an unprecedented revolution. With this alliance, we’re beginning to work hand in hand with Starlink Enterprises to offer new-generation solutions to our clients,” Beamonte told Wired.

This partnership enhances Starlink’s market position and underscores the growing demand for satellite internet in areas where traditional infrastructure is lacking or insufficient. Starlink is solidifying its presence as a leader in Mexico’s telecommunications landscape by targeting government initiatives and private sector needs.

A Challenge for Widespread Adoption

Starlink faces significant challenges in penetrating the broader Mexican market despite its rapid expansion and strategic partnerships. One of the primary hurdles is the cost of its service. In a country where the average monthly cost for broadband internet is 533 pesos, according to Cable.co.uk, Starlink’s pricing is considerably higher. Customers must pay a one-time fee of 5,900 pesos for the hardware, followed by a monthly service fee of 1,045.

This pricing structure positions Starlink as a premium service, limiting its accessibility to a broader population, particularly in low-income areas where affordability is critical. While the government contracts aim to provide free or subsidized access in remote regions, the high costs associated with Starlink’s service could hinder its ability to attract a more extensive customer base in urban and suburban areas, where competition with cheaper, traditional broadband providers is more intense.

As Starlink continues to expand its footprint in Mexico, the company is poised to face increasing competition. While it currently enjoys a strong market position bolstered by government support and strategic alliances, the telecommunications sector in Mexico is far from static. According to consultancy firm Select, the country’s information and communication technology (ICT) industry grew by 6.9% year-over-year in early 2023, reaching revenues of 334 million pesos. This growth has been driven by a surge in demand for digital services, the expansion of ICT business partnerships, and the rapid adoption of cloud-based services.

With new players eyeing the Mexican market, the competition in the satellite internet space is expected to intensify. Analysts predict that as more companies enter the fray, Starlink will need to navigate challenges related to pricing, service delivery, and regulatory compliance. Moreover, as the industry evolves, the company’s reliance on government contracts could become a double-edged sword, particularly if political dynamics shift or if other providers manage to secure similar agreements.

A Growing Industry with High Stakes

The future of satellite internet in Mexico is bright, with significant opportunities for growth and development. However, the stakes are high, and Starlink’s continued success will depend on its ability to adapt to a rapidly changing environment. The company’s current dominance is impressive, but sustaining that position will require ongoing innovation, strategic investments, and a keen understanding of the unique challenges presented by the Mexican market.

For now, Starlink’s blend of cutting-edge technology, strategic government partnerships, and private sector expansion has positioned it as a formidable force in Mexico’s telecommunications sector. As the company looks ahead, it must continue to balance these strengths against the potential risks and challenges that lie on the horizon.

Elon Musk’s Starlink has quickly established itself as a key player in Mexico’s digital landscape, leveraging government contracts and strategic alliances to fuel its rapid growth. However, as Wired’s report highlights, the company’s journey is far from over. With the telecommunications sector in Mexico poised for further expansion and competition, Starlink will need to stay ahead of the curve to maintain its leadership position.

Also read: Bridging the Digital Divide in Mexico Empowering Women and Indigenous Communities

As Mexico continues to embrace digital transformation, the role of satellite internet will become increasingly important. Whether Starlink can continue to lead this charge will depend on its ability to navigate the complex interplay of technology, politics, and market dynamics that define the country’s telecommunications industry. For now, Starlink’s story in Mexico is one of remarkable growth and opportunity, but the challenges ahead will test the company’s resilience and adaptability in equal measure.