A bad bet on a satellite company

A bad bet on a satellite company

In today's newsletter we talk about Softbank's latest "bet gone wrong" and the problem with ration cards


Business

The Story

Our first story today is on Softbank. So a couple of days back, the company said in a statement that they were likely to report losses of close to $12.5 billion for this financial year (ending March). In fact, this will be the first time in 15 years, Softbank will have reported an operating loss, period.

However do bear in mind, that this declaration wasn’t exactly surprising. Especially considering, Softbank has had to take a few L’s (losses) on some of their biggest investments this past year. Think WeWork.

What was surprising however is that the company attributed a good chunk of its misfortune on another investment that went to zero. A bet on a company called One Web.

Reaching for the stars

So One Web was a global telecommunication company trying to offer cheap reliable internet by leveraging a constellation of about 600 satellites scattered across the earth’s exosphere.

Yeah, that’s right. They wanted to make 4G services accessible to the world’s population any time any place using satellites.

However, getting satellites into orbit isn’t exactly an inexpensive affair.

First, you need some rockets!!! Big ones.

If you don’t have the rockets then you need to get in touch with someone who has the rockets.

Someone like Elon Musk (SpaceX types)

But he won’t oblige because he’s building his own satellite constellation (called Starlink). And suddenly you find out that this gig is both expensive and competitive.

But let’s say you do find somebody who will help you get your satellites up and running. Then you’ll have to pay them millions of dollars hoping that someday you’ll be able to put all these assets to good use.

And One Web reportedly spent close to $3.4 billion building this infrastructure (and sending satellites into space) primarily financed by the good people at Softbank (who offered close to $2 Bn).

Now, for all we know, maybe the company could have been one of those moonshots. Unfortunately, as it so happened, Coronavirus has pushed the company to bankruptcy instead.

Terrible!!!

You see, space exploration is a different beast altogether. Even during the best of times, the amount of uncertainty in this business is just too much. Coordination, manpower, money, you’ll need everything in bulk. And despite the exorbitant sums of money companies like one web invest in this endeavour, come launch day, everything might go for a toss. Also, right now with the lockdown in place, there’s no clear consensus on when space missions are likely to resume. Meaning nobody can tell if One Web’s latest satellites are going to take to the sky anytime soon.

So with the company running out of funds and investors holding their purse strings, they had no choice but to pull the plug.

Yes, Softbank could have bailed out the company but we all know how that worked out, the last time around, with WeWork. And so, with Masayoshi Son (CEO of Softbank) refusing to intervene, One Web had to finally call it quits.

The End


Policy

Free food for everyone

Our second story is about ration cards. More specifically about how we might end up depriving millions if we don’t change our policy on food security very soon.

Anyway, here’s the lowdown. So the government of India has been trying it’s best to put together a stimulus package for the country's poorest during this unprecedented lockdown.

The package includes a host of measures such as free gas cylinders, insurance cover for all health workers, financial aid for women, the elderly and disabled, increased wages under MGNREGA, more foodgrains under the Public Distribution System, etc.

While all this is great stuff, that bit about making foodgrains accessible through the public distribution system might need a little extra consideration. Now, granted, the government has already planned to offer 5 kg of rice or wheat every month free of cost, over and above the 5 kg people are already entitled to.

But this policy is only applicable to a subset of the country’s population.

Here’s an excerpt from an article on Livemint that drives home the point rather succinctly

The central food security scheme currently covers around 800 million people, or about 62% of the Indian population, but leaves out many of its poorest. The primary reason: The list of beneficiaries of the public distribution system has not been updated for over five years and excludes many children and newly married women.

Meaning if you haven’t got your ration card yet, or even worse, you’ve left it back home for your family (applicable to migrant workers) you won’t be a beneficiary here.

So, many people have been lobbying to get the government to change its policy considering the extraordinary circumstances and extend food security to everyone, irrespective of whether they have a ration card in tow.

And hopefully, the government takes this consideration seriously

Until then…


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