Starry, Inc, a wireless internet service provider (WISP), today announced that it will become a publicly-traded company through a merger with FirstMark Horizon Acquisition Corp (NYSE: FMAC), a special purpose acquisition company (SPAC) with backing from FirstMark Capital, in a transaction which pegs Starry at a pro forma enterprise value of $1.66bn.

Upon completion of its merger with FirstMark Horizon Acquisition Corp, which is expected to close in Q1 2022, Starry will be listed on a to-be-determined national exchange under the symbol STRY. Finally, post-merger, Starry will continue to be led by its CEO, Chet Kanojia.

Starry – Business Overview

Starry is a licensed fixed wireless technology developer and wireless internet service provider (WISP). The company provides customers with high-speed, fixed wireless broadband services that are competitively-priced to fiber broadband offerings.

Starry’s wireless network serves fixed broadband users, including residential and small- and medium-sized businesses. For Starry, the company’s wireless technology reduces the cost of connecting these homes and businesses to the internet. Ultimately, the company aspires to provide a fiber-quality connection through the air, offering symmetrical speeds tiers between 200 megabits per second and 1 gigabit per second.

Existing Network

Starry’s network covers/passes over 4.7 million U.S. households across six markets, through which the company has 48k subscribers, equivalent to a 1% penetration rate. Geographically, this network spans six U.S. cities including Boston, New York, Los Angeles, Washington D.C., Denver, and Columbus.

In 2020, Starry’s subscriber base generated $13m of revenue and for 2021, Starry anticipates it will reach revenue of $22m.

Network Expansion

Starry plans to expand its network to cover/pass 25 million households by 2026. At this time, Starry projects it will have 1.43 million residential and small business subscribers, equivalent to a 5.7% penetration rate. By 2026, Starry expects its 1.43 million subscribers will produce $1.1bn of revenue and $518m of EBITDA (46.5% margin).

Projections2022E2025E2026E
Passed12 million21 million25 million
Serviceable6 million15 million19 million
Subscribers115k906k1.43 million
Penetration Rate~1%4.3%5.7%
Revenue$67m$679m$1.1bn
Starry defines its key operational metrics as follows:
  • Passed: households that are within the range of a Starry base station site, meaning they are potential subscribers
  • Serviceable: households that are passed and that can receive a signal based on Starry’s propagation modeling, which targets 80% serviceability
  • Subscribers: households that sign-up for Starry service, with the company targeting a 20% penetration rate

Starry states that it can build networks at 1% of the cost of fiber, assuming fiber passing costs of up to $1,250 in urban areas. Whereas Starry’s average cost of passing a home, during the time period of 2019 to 2021, was $10. Finally, the company notes that its breakeven point is at only 4% subscriber penetration.

Digital Infrastructure

Starry leverages the passive digital infrastructure of neutral-host providers to enable it to wirelessly transmit internet speeds, of up to 1 gigabit per second, from towers and rooftop sites to a user’s home or business.

Starry Network Digital Infrastructure

In contrast, Starry’s active infrastructure and network hardware, includes base stations, home receivers on customer premises, and Wi-Fi routers that serve a customer’s home.

Starry’s active infrastructure and network hardware consists of:
  • Base Station Sites: known as Starry Titan, which transmit Starry’s last-mile licensed fixed wireless signal to customer locations, with capacity of 35+ gigabits per second, per site
  • Transceivers (Customer Terminals): known as Starry Trident for large apartment buildings or Starry Comet for small apartment buildings and single-family homes
  • Wi-Fi Router: known as Starry Wi-Fi; every customer receives a Wi-Fi router
Starry Active Infrastructure Network Hardware

Spectrum

Starry uses licensed high-frequency millimeter wave (mmWave) spectrum to deliver its high-capacity, low-latency, symmetrical connectivity over distances of up to 1 mile. Specifically, Starry holds licenses for millimeter wave (mmWave) spectrum covering 40 million homes in 37 states, as shown below:

Starry Millimeter Wave (mmWave) Spectrum Footprint
Starry Millimeter Wave Spectrum Footprint Map
Click here for a larger version of this image.

Starry holds spectrum licenses in the 24 GHz band and a market test authority for the 37 GHz to 37.6 GHz band.

Network Architecture

Starry deploys its base station sites on vertical infrastructure that provides the company with sufficient elevation above environmental obstacles. For example, this infrastructure includes cellular towers, building rooftop sites, and utility poles.

Starry Network Architecture
Legend: 1) base station, 2) transceivers (customer terminals), 3) wiring to bring service into the building, and 4) modem and Wi-Fi router

As Starry places its base stations at higher elevations, relative to a customer’s home or business, the line-of-sight for its signal increases, thus maximizing the number of homes served from each site. Additionally, high transmit power and directional antennas allow Starry to serve customers at over 1 mile from each base station.

Overall, the company’s goal is to dynamically deploy its network using digital infrastructure, while optimizing for elevation and range.

Starry Network Range in Free Space

In free space (i.e., unobstructed), Starry’s signal can travel 6.2 miles (10 kilometers). Furthermore, the company designs its network to ensure its target coverage area is only 25% of the maximum transmission distance.

Pricing and Competition

Starry generates a $50 average revenue per user (ARPU) for its base plan, offering internet speeds of 200 megabits per second. Also, the company charges $65 for 500 megabits per second and $80 for 1 gigabit per second service.

At these pricing and service levels, Starry’s competition derives from a number of different broadband providers including legacy DSL, cable, fiber, low Earth orbit (LEO) satellites, and fixed wireless access (i.e., mobile 5G).

Starry Broadband Competition Comparison
Click here for a larger version of this image.

Particularly, these companies include Frontier Communications, Windstream, Comcast, Charter Communications, Verizon Fios, MetroNet, Starlink, Amazon’s Project Kuiper, Verizon 5G Home, and T-Mobile 5G Home.

Transaction Overview – Starry, FirstMark Horizon Acquisition Corp

Starry’s merger with FirstMark Horizon Acquisition Corp implies a pro forma enterprise value of $1.66bn, equivalent to 6.9x 2025E adjusted EBITDA of $240m and 41.5x 2024E EBITDA of $40m. Notably, Starry does not expect to generate positive EBITDA in 2021, 2022, and 2023.

As part of the transaction, existing Starry shareholders (e.g., FirstMark) are rolling 100% of their equity in the deal and will receive 71% of the pro forma equity. Therefore, Starry is generating solely primary proceeds for growth (i.e., no secondary / selling shareholders) through the merger.

Sources of Funds

Starry’s merger with FirstMark Horizon will be funded through a combination of FirstMark’s $414m of cash in trust and a $130m PIPE (Private Investment in Public Equity). The PIPE funding involves the sale of 13.0 million shares at $10.00 per share to new institutional and existing investors. Specifically, these investors include ArrowMark Partners, Atreides Management, Fidelity Management, Tiger Global Management, and FirstMark Capital.

Starry FirstMark Horizon Transaction Sources

Additionally, Starry will issue $150m of new convertible debt, to retire its existing debt. Particularly, this convertible debt is led by AS Birch Grove and Highbridge Capital Management.

Use of Proceeds

Starry will use this growth equity and convertible debt to deploy its services across the United States, and to retire $207m of the company’s existing debt. Initially, post-transaction, Starry will have $452m of cash on its balance sheet to fund its growth initiatives.

Starry FirstMark Horizon Transaction Uses

Transaction Advisors – Starry and FirstMark

Starry’s financial advisor was Goldman Sachs. Additionally, Starry’s legal advisor was Latham & Watkins.

FirstMark’s financial advisor was Credit Suisse. Additionally, FirstMark’s legal advisor was Skadden, Arps, Slate, Meagher & Flom.

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