Elon Musk’s company could soon provide encryption for telephone and Internet communications used by the Italian government and army. The deal has been under consideration since mid-2023, but has faced opposition from local telecommunications providers.
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The Italian government is moving forward with negotiations toa 1.5 billion euro agreement with Elon Musk’s SpaceX company, for the provision of telecommunications security services. This development follows Italian Prime Minister Giorgia Meloni’s visit to US President-elect Donald Trump in Florida, according to Bloomberg reports.
Although the five-year contract has not yet been finalized, Elon Musk’s support for Donald Trump could accelerate discussions between the parties. Italian intelligence services and the Ministry of Defense have reportedly already approved the project.
Services offered by SpaceX could include encryption of telephone and Internet communications used by the Italian government and military. The deal has been under consideration since mid-2023, but has faced opposition from local telecommunications providers.
Local businesses oppose the deal
In November, pressure group Assetel has called for a review of regulations governing low-orbit satellite broadband operations. The group raised concerns about SpaceX’s business model of selling consumer devices directly to customers, potentially circumventing existing rules.
Assetel also points out that Starlink’s services compete directly with local telecommunications operators and has urged the government to impose regulations requiring sensitive data to be stored in the country.
Italian telecommunications operators had to face growing debt and falling income due to intense price competition. For example, Telecom Italia SpA reported net debt of 8 billion euros in the third quarter, even after selling its network to U.S. private equity firm KKR & Co. in a government-backed deal and valued at 22 billion euros.
Meanwhile, Swisscom AG completed its €8 billion acquisition of Vodafone Italia in December, as the company’s Italian division faces ongoing financial difficulties. Vodafone announced a loss of 739 million euros after tax for the half-year ending in September.
Italy faces challenges to meet EU-funded industrial targets
The Italian government has been exploring ways to help local industry meet broadband network targets set by the European Union-funded recovery plan.
At the end of the second quarter of 2024, Italy had the second highest ratio of public debt to GDP, at 137%.. The country is expected to receive 194.4 billion euros in cheap loans and grants from the Recovery and Resilience Facility (RRF) by 2026.
However, Italy is behind in using the already guaranteed recovery funds, which amount to 113.5 billion euros, as the economy is no longer expected to be able to meet its growth target.
The broadband network project is a key part of the infrastructure spending plan to revive the Italian economy. According to the Italian cabinet undersecretary, Alessio Butti, the government would consider using Starlink to catch up on delays accumulated by Italian companies.
Currently, local telecommunications operators, including Open Fiber and its competitor FiberCorp, have wired only about a third of the 3.4 million buildings covered by the 3.4 billion euro plan.
SpaceX’s growing global presence
In December, SpaceX, Elon Musk’s company, announced that it had launched 20 new Starlink satellites, completing the first orbit of its innovative satellite phone internet service. The aerospace company added more than 20 nations to its Starlink satellite internet services in 2024.
Starlink has 6,700 active satellites orbiting Earth, and more than four million customers use its broadband services in more than 100 countries around the world. Italy currently has around 55,000 customers, served by 7,000 SpaceX satellites.
