Italy in talks over SpaceX telecom security services deal

The Italian government is advancing negotiations for a €1.5bn telecommunications security services deal with Elon Musk’s SpaceX. The development follows Prime Minister Giorgia Meloni’s visit to President-elect Donald Trump in Florida, according to reports on Bloomberg.

Although the five-year contract has not yet been finalised, Musk’s backing of Trump may accelerate discussions between the parties. Italy’s Intelligence Services and Defence Ministry have reportedly approved the project.

The services proposed by SpaceX may include encryption for telephone and internet communications used by the Italian government and military. The deal has been under review since mid-2023 but has faced opposition from local telecommunication providers.

Local rivals oppose the deal

In November, the lobby group Assetel called for a review of regulations governing low-orbit satellite broadband operations. The group expressed concerns over SpaceX’s business model, which involves selling consumer devices directly to customers, potentially bypassing existing rules.

Assetel also highlighted that Starlink’s services directly compete with local telecom operators and urged the government to impose regulations requiring sensitive data to be stored domestically.

Italy’s telecom operators have struggled with mounting debt and shrinking revenues due to intense price competition. For instance, Telecom Italia SpA reported €8bn in net debt (after leases) in the third quarter, even after selling its network to US private equity firm KKR & Co. in a government-backed deal valued at €22bn.

Meanwhile, Swisscom AG completed its acquisition of Vodafone Italia for €8bn in December, as Vodafone’s Italian division faced ongoing financial challenges. Vodafone reported a €739m after-tax loss for the six months ending in September.

Italy faces challenges in meeting the EU-funded industrial goals

The Italian government has been exploring ways to back the local industry to meet broadband network targets set under the European Union-funded Recovery Plan. 

Italy had the second-highest ratio of government debt to GDP at 137% by the end of the second quarter of 2024. The nation is due to receive €194.4bn in cheap loans and grants from the Recovery and Resilience Facility (RRF) by 2026. However, Italy is behind schedule in spending the already secured recovery funds of €113.5bn as the economy is projected to lose traction in meeting its growth target. 

The broadband network project is a key component of the infrastructure spending plan designed to boost Italy’s economy. In November, Reuters reported that Italy’s cabinet under-secretary Alessio Butti revealed the government was considering using Starlink to make up for delays accumulated by companies in charge of Italy’s high-speed internet rollout programme. 

Currently, local telecom operators, including Open Firber and rival FiberCorp, have only cabled around a third of the 3.4m buildings targeted by the €3.4b plan. 

SpaceX’s growing global presence

In December, Elon Musk’s SpaceX announced that it had launched 20 new Starlink satellites, completing the first orbital shell for its innovative satellite-to-cellphone internet service. The aerospace company added more than 20 nations to its Starlink satellite internet services in 2024. Starlinks has 6,700 active satellites orbiting Earth, with over four million customers using its broadband services in more than 100 countries globally. Italy currently has approximately 55,000 customers, serviced by 7,000 SpaceX satellites.