Globalstar, a mobile satellite services (MSS) operator in which Apple has a 20% stake, on Tuesday announced a merger agreement with Amazon, which, pending regulatory approval, could soon bring direct to device services (D2D) services to Leo, the latter’s low Earth orbit satellite network.

The deal, worth an estimated $11.6 billion, is an indication that the so-called new space race, designed to integrate satellite communications into smart phones, is certainly not slowing down.

In addition to the merger, the two companies stated in a release that Amazon Leo (formerly known as Project Kuiper), which is scheduled to launch this year, will power satellite services for iPhone and Apple Watch, including Apple’s Emergency SOS satellite service.

As part of the agreement, the release said, “Amazon will acquire Globalstar’s existing satellite operations, infrastructure and assets, including MSS spectrum licenses with global authorizations.” Amazon also said it will deploy its own “next-generation D2D satellite system” in 2028.

Licensed spectrum seen as ‘key to the deal’

Roger Entner, analyst and founder of Recon Analytics, said of the deal, “Amazon just bought itself a big relationship with Apple, first and foremost. Globalstar is such an integral part of Apple on a global basis. This lays the foundation for when Leo comes online to expand and deepen that relationship.”

On a global basis, he said, that is ideal for all the iPhone customers around the world, and in addition, the acquisition represents a powerful counter move against Starlink, and its mobile, direct to device initiatives.

It is, added Entner, a smart move by Amazon, and with Apple being a major shareholder in Globalstar, the deal did not happen without its approval. “I see winners all around here, and it [also] puts a little bit of a damper on SpaceX and its IPO.”

Scott Bickley, advisory fellow at Info-Tech Research Group, said, “Amazon is acquiring Globalstar primarily for its licensed spectrum, which is one of the hardest assets to secure in telecom, and rarely comes to market from the FCC.”

Globalstar, he pointed out, “has valuable L-band and S-band licenses, which are well-suited for direct to device connectivity and allow regular smartphones to connect to satellites without specialized hardware. That alone can compress Amazon’s timeline by several years.”

Bickley said the deal “also brings existing satellite operations, regulatory relationships, and experience, but this doesn’t materially close the gap with SpaceX. Starlink operates at a completely different scale, with full vertical integration, including its own launch capabilities.”

Anshel Sag, principal analyst at Moor Insights & Strategy, described the merger announcement as something he has been “tracking for quite some time. This helps Amazon add more infrastructure and spectrum for satellite communications to Amazon Leo, and adds arguably one of the biggest customers in the industry, Apple. This also confirms the rumors that have been swirling for the last few months about Globalstar’s acquisition.”

Globalstar, he added,  is a “really interesting company, because Apple owns 20% of it through over $1 billion in investments over the last few years. The CEO, [Paul E. Jacobs] is also Qualcomm’s former CEO and the son of its founder. [He] came on board when Globalstar made a strategic investment in XCOM Global, a company working on XR and 5G technologies.”

Merger provides Apple with a healthy ROI

Globalstar is, said Sag, also in the process of modernizing its satellite constellation with Apple’s help, and prior to the acquisition, it was going to dedicate 85% of that new capacity to Apple.

With the acquisition, Sag noted, “Amazon is not only getting an industry brand name, but also arguably the world’s biggest customer, which has already signed a new agreement with Amazon to work together, likely in an even larger capacity with the combination of Globalstar and Amazon Leo’s assets.”

The $11.6 billion purchase price, said Sag,  also “gives Apple a great return on its investment, while beefing up its capabilities, and means that iPhones will work on both Amazon’s Leo network and SpaceX’s Starlink service.”

And while he does not believe that satellite will replace terrestrial networks in most cases, “air travel has proven to be one of the best use cases outside of the occasional rural user. Amazon’s Leo service also seems to prioritize enterprises and the AWS tie-in, which I believe will be a much better path to profitability and scale than selling directly to consumers.”

This acquisition, said Sag, “also appears to be on track for FCC approval, based on Brendan Carr’s statements about the desire for industry leadership in the United States. 6G also seems like it will heavily incorporate satellite communications into the standard, so I think this kind of consolidation might be good, but it does reduce competition to a certain degree.”

If that occurs, he pointed out, the deal will make Amazon Leo an even more capable competitor to SpaceX and could be seen as validation of SpaceX’s strategy, but it could also impact SpaceX’s upcoming IPO valuation.

Ultimately, said Sag, “consumers and businesses will want choice when it comes to satellite connectivity, whether it’s for broadband, IoT, or direct to device consumer connectivity. I suspect we’ll see more companies sign with Amazon Leo as its capabilities and spectrum expand. I also believe this might increase the need for more spectrum auctions, which I believe SpaceX has already been pushing for.”

And, said Info-Tech’s Bickley, Amazon is “betting on direct to device at scale, and if that works, the addressable market extends well beyond traditional satellite broadband. Globalstar’s relationship with Apple adds a potential entry point into that ecosystem.”

The challenge is execution, he said. Amazon is still constrained by third-party launch providers, and now has to integrate a legacy satellite network into Kuiper. Meanwhile, Starlink already has well over 10K satellites, is already profitable, and is continuously expanding its footprint.

Apple has not yet responded to a request for comment about the fate of its stake in Globalstar, but, as Entner pointed out, “20% of Globalstar is not 20% of Amazon.”

This article originally appeared on Computerworld.