AST SpaceMobile - SpaceX Just Declared War

[00:00:05] Speaker A: Hey everyone, thanks for joining. I'm live down in Titusville, the Courtyard Marriott, which is very close to Kennedy Space Center. Unfortunately, it's raining a little bit here and we've had a number of large lightning strikes, but I'm told it's pretty common here in Florida. So, um, as far as I know, I think we're, we're still set for launch. Yeah, we're still set for launch. At 3:42, there might be a pushback to possibly 5, but we'll find out. But I did want to fire up a space after this SpaceX earnings call, which was candidly quite shocking. I did not expect Gwynne Shotwell or Elon Musk to talk about or disclose what they just did on the call, which is pretty nuts. I think It's safe to say that SpaceX, uh, their, any type of relationship with T-Mobile is pretty much gone at this point. Um, on the call for those that missed it, and I, I did put in the relevant excerpts from the transcript. Um, and this is from Bloomberg real-time, you know, translation where they put in all the ums and filler words, which, uh, I'll do another post that takes those out, but. But yeah, it was insane. In the Q&A, they pretty much took the mask off and said, we're gonna be taking customers from AT&T, Verizon, and T-Mobile. And then they went beyond that. They actually said that they're gonna build out a terrestrial network. And so if T-Mobile needed any more convincing, Deutsche Telekom or any global MNOs, if they were on the fence about this, yeah, Starlink is coming to eat your lunch. And we got a little bit of a preview of that in the earlier part of the call. Elon Musk talked about how Starlink, their plan is for Starlink to deliver a vast majority of the world's data communications. And so that's a pretty big claim. And, you know, I think some of us read into that they were eventually going to try to target mobile devices. But, you know, it's, it's like, okay, that's a good claim. You know, maybe it's just broadband, but then later. when he was asked, when Gwynne and Musk were asked directly about direct-to-cell and their strategy, they just let— they just spilled the beans. There's no hiding or kind of talking about working with MNOs and eventually getting there or whatever it is, right? Like they just talked about how they're going directly after the MNOs' customers. And so in regards to the US, Starlink specifically said, and this was Gwynne Shotwell, that when someone asked about the opportunity For direct-to-cell, she then referred to AT&T, Verizon, and T-Mobile roughly having about $600 billion of revenue a year. And so they— she said specifically that they anticipate they'll be able to acquire quite a few customers of the MNOs because they think their service will be better. And so by eliminating dead zones and leveraging satellites in orbit, they think that their service is going to be better, right?
[00:03:17] Speaker B: And so So yeah.
[00:03:19] Speaker A: Okay.
[00:03:20] Speaker B: Yeah.
[00:03:20] Speaker A: Your service is gonna be better in, in certain areas, but not in, you know, dense urban areas. Right. Um, because towers are, are superior. They're, you know, by having terrestrial spectrum and, and a dense amount of towers, then, um, the MNOs are gonna be able to, they, they do today and they are gonna be able to deliver a, a better, you know, quality of service. However, I think it's in Starlink's estimation that with their 65 megahertz of EchoStar spectrum, which is mid-band spectrum, and then the densification of the constellation, which is going to be the next V2 satellite, which they're going to launch next year. They're saying, well, we're going to be able to offer a good enough service where you've got, you know, 10 times more spectrum, and then you're going to have 10 times more satellites, which are each themselves more capable. Maybe they're going to be able to provide something. on the order of, you know, service that's going to be similar to what MNOs can provide out in the suburbs and rural areas. And then, um, the next question, they, they then dug into the idea of building a terrestrial network. And so, uh, I forgot who asked the question, but they talked about using small cells, right? So femtocells, they didn't go into too much detail. And this was in response to a question being asked about the CapEx to build a network that can compete against terrestrial networks. And they said, well, we think we can do a CapEx-light version of that by deploying small cells. My guess is, you know, they, the idea would be for them to deploy small cells in dense urban environments, right? And then leveraging also people who have Starlink at home, they'll probably give you maybe a discount or they'll deploy, um, they'll give you a new type of dish that will also allow them to piggyback your location to send out cell network, cell, cell, um, signals, which I don't know how many users are going to be happy about that because, um, if you can imagine people being upset about having cell towers and, you know, there's like these conspiracy theories about it impacting your health, like how would you like it if you If your Starlink is being leveraged, you know, your dish is being leveraged to then, um, you know, transmit cellular signals, right? Um, I don't know how many people are going to be happy about that, but they talked about this concept where, um, instead of putting large base stations, they're going to, they could make their own, um, kind of, you know, cellular cell tower from retail users, I guess. And then also maybe, um, Enterprise users as well. But, uh, they think that they'll be able to deploy spectrum more cheaply. Obviously, if you're leveraging primarily satellites for coverage, then that's, that's going to be cheaper than cell towers. But then in these denser urban environments, they, they might, uh, refer, they might have to go and actually deploy cell towers, right? Um, or some combination of cell towers and then, uh, Starlink dishes at offices and homes that will kind of, you, you use some type of, or have a dual purpose. The other thing too that they've talked about in the past is having perhaps Teslas being mobile cell towers as well. And so, yeah, I think pretty much everything is on the table. And so even Elon Musk talked about how, let me see here, how large cellular base stations are difficult and they feel like they have a solution where they can deploy a large number of small base stations, right? And so whether that's again at your home or an office of enterprise user, or maybe it somehow gets built into Teslas, you know, we'll see. But I think it's the important takeaway here, and I alluded to this earlier, is that T-Mobile is going to work with AST SpaceMobile. I mean, that's just a— I can definitively say that. I don't know when that's going to happen because these, these matters are complicated. But it is a matter of when, it's not a matter of if. From what I understand, I believe the company, uh, AST SpaceMobile and T-Mobile are in talks. And I think apparently those talks are going well. Um, as we know, Chris Sambar is going to be joining T-Mobile shortly. I don't think he's there yet, but he will be. Um, and so you can kind of read the tea leaves, um, in the reverse way. From this SpaceX call, because, uh, if things were going well with T-Mobile, or if SpaceX, you know, knew about the joint venture and had some initial conversations with Verizon, for example, uh, or AT&T, um, if they felt positive about any of those potential discussions, which, by the way, AST has exclusivity with, mutual exclusivity with AT&T and Verizon. that last multiple years. And so even if Starlink, you know, SpaceX wanted to work with them, they would have to wait until those agreements sunset. But, um, the way to read this, this SpaceX call is if, if the discussions were going well with T-Mobile about extending whatever they're doing together, or, um, potentially working with Verizon or AT&T, you would not have this type of response in the Q&A. You would say, oh yeah, we are positive and bullish on our partnerships with T-Mobile, and we hope to get AT&T and Verizon at some point in the future. We'd like to work with MNO partners. There was none of that. There was none of that. I think SpaceX understands the current dynamics too. Like, they're under no illusions, and they know that the Street is going to be able to Or I take that back. The Street has been pretty dumb about this whole situation, but at least for anybody who's thinking, you know, who's thinking strategically beyond, you know, a week or 2 weeks or a month, or who's thinking about the long term, it's hard to hide this fact, right? Like you, and that's why SpaceX is coming out and saying, okay, look, we bought all the spectrum. We know that the time is almost at an end for working with any MNOs in the US. And so, and from SpaceX's perspective, the upside is to go directly compete against the MNOs, right? It's not to buy an MNO, but it's to go as a, and this is like as a growth company, what you want to do is if you can do, if you can build a competing product in a cost-efficient way, you want to go take share because that's the best margin. And people are gonna be able to, or people are gonna award you a premium valuation if they see this massive $600 billion revenue opportunity and you're able to say, well, you know, in year 1 we'll get 2%, 3%, and year 2 maybe we'll get 5 or 6%. Those are big numbers, right? And that's what people are gonna award you for because they see this massive opportunity for you to take share versus, the harebrained idea of like, oh yeah, SpaceX is going to go buy Verizon or T-Mobile. I've talked about the idea of that, which is, um, sure, you can go buy, uh, I mean, if you tried to buy one of the wireless carriers, I think the FCC and DOJ would block that deal. But then, um, by doing a deal like that, you, you obviously you're going to buy a bunch of revenue, but it's going to come, it's going to be expensive, right? Like I think Verizon's enterprise value is $384 billion. So you'd have to pay what, $500 billion? So overnight you're going to become a, A slow, I mean, a profitable, but a slow, you know, flattish wireless carrier. That makes no sense, right? And that's shooting your load on one deal. When for SpaceX, like the opportunity is to build some type of alternative and then just take share over time. Now, some, you might ask yourself, you know, if you're new to the AST space story, well, why is that good for AST? Like, isn't SpaceX, you know, this is— They're going to go compete with MNOs and MNOs are partners of AST. Is that good?
[00:11:31] Speaker B: Yes.
[00:11:32] Speaker A: This is like the best news possible. Like AST. So let's, let's take a step back. MNOs, their terrestrial networks are great, right? Like they, they offer tremendous service. Um, they do offer a tremendous amount of value. Uh, and they have a shit ton of terrestrial spectrum, right? It's hard to compete against that. What AST does is it gives them the thing that they're missing when they need to compete against Starlink, which is the ability to fill dead zones with broadband, true broadband. They also to fill areas where you just have 1 bar service. Hey, instead of using terrestrial tower there where it's bad, we're gonna just light that spectrum up with a satellite that can deliver, you know, 100 megabits a second, megabits per second. For Block 1 satellites, it'll be 200 megabits per second for Block 2 satellites. And it's gonna increase from there, right? But this, what SpaceX is doing right now is they're forcing all the MNOs to work with AST, right? Like, and AST already has superior technology. You know, it's not a confrontational or an antagonistic relationship. They're actually working in partnership with mobile carriers. And so imagine like the strategic counter for the mobile carriers to Starlink coming after them is AST SpaceMobile.
[00:12:53] Speaker B: Yeah.
[00:12:53] Speaker A: And that's on a 50/50 revenue share basis. It's a customer uptake story. And so that's that same thing where SpaceX is gonna go talk to its investors and say, hey, what if we get 3 or 4 or 5% of the mobile market? That's gonna be huge for us. Well, that dynamic exists for AST. I mean, the uptake will be faster because they're not working against MNOs, they're actually working with MNOs. And this is gonna be something that's a 50/50 revenue split. 'Cause remember, like for SpaceX, this is a pretty expensive problem. Like they are, and they already do it because the direct, the broadband business to your home, they already have sales and marketing support. They already sell directly to consumers. Well, the mobile phone business is quite different. It's very expensive. The amount of money it takes to acquire a customer is what, $600, $700, $800 on average or whatever it is. And then you've got to support that customer and that takes—
[00:13:51] Speaker B: Yeah.
[00:13:51] Speaker A: that takes money and infrastructure, right? And that's the beauty of AST SpaceMobile's model in that they piggyback the— the MNO already has a customer. They just have to provide this service by turning it on, and AST shares in the revenue of that. Now, obviously, it costs money to deploy the constellation and to continuously upgrade the constellation. They're also deploying other satellites for not just low-band spectrum, which is the carriers, the carriers own that. They're reusing that spectrum, which is great. And that's part of the beauty of the model. But then they're building satellites that will utilize Ligado and other mid-band spectrum around the world. And then the, the next generation of that will be C-band spectrum satellites, right? Which has been in the roadmap since, you know, at least as far back as my initial conversation with Abel in 2021. He talked about, we're gonna have low-band satellites, we're gonna have mid-band, and we're gonna have C-band. Right? Which is 3.5 gigahertz to 4 gigahertz, that spectrum, which is what AT&T and Verizon and T-Mobile are deploying today or have deployed. And that's the additional spectrum that's coming up for auction. But yeah, today, I just, I don't know how the press is going to react to this. We'll see if anyone catches it. And the sell side too. I mean, the sell side, Tomorrow, sell side is going to come out with notes being like, you know, these guys are going after AT&T, Verizon, T-Mobile. And so, oh yeah, so I'm already looking. Okay, so Bloomberg already has the comments and AT&T, Verizon, and T-Mobile have already traded down 4%. So headline, Verizon, AT&T, T-Mobile fall more than 4% on SpaceX comments. Okay, so the press is getting it. So this is an exciting time for AST. I mean, if they're unlike Tim Farrar, our favorite brain-dead consultant, who, if folks will recall, that morning when AT&T, Verizon, and T-Mobile announced their joint venture, I think it was like an after-hour, that press release. And of course, AT&T put out a press release like— or sorry, AST put out a press release 1 minute after. commending that joint venture. So clearly they were in on it. Uh, I remember Tim Farrar, I got to retweet it. Maybe Tim Farrar literally said, this joint venture is so that the MNOs can compete, uh, uh, can negotiate more effectively with Starlink, which was the absolute wrong read. It was, it was, um, it couldn't, uh, it couldn't have been more wrong. Right. Um, because that joint venture was to form a coalition uh, to pull resources together to build a much better satellite service, um, which AST is powering, uh, as a strategic counter to Starlink. And so, um, so by the way, like the fact that Starlink has said this stuff publicly, that's for the regulators. Um, now, you know, if you're Brendan Carr, you're like, oh, great. Starlink is going to compete against the 3 carriers and we're going to have this 4th carrier, which, which is wonderful. When you make that public proclamation, that goes into the public record for regulators. And so if Starlink were to come around, if SpaceX, that is, were to come around and say, hey, we want to go buy T-Mobile, then the regulators would say, wait, hold on a second. You said you were going to create a 4th competitor. Now you want to buy T-Mobile? So it's actually a negative knock for them, right? Because they've now made it known that they are interested in, are committed to building a 4th competitor, which from a regulatory standpoint, that's good for SpaceX. Um, for, you know, if they want to go buy more spectrum, if they want to do, um, invest in the network, do all these different things, then the FCC will be supportive where they're like, okay, well, we'll support you. Um, for AT&T, Verizon, and T-Mobile for this joint venture, now there's a, there should be a higher sense of urgency to get this thing to a definitive agreement. And for them to start working more vigorously with AST SpaceMobile. And it'll be hard. Or, um, before I talked about the idea that T-Mobile wouldn't drop Starlink and they'll keep it as an option, but then they'll push forward AST as their preferred option. Um, now that Starlink has, and SpaceX has said they're, they're creating a terrestrial network and they're going to compete for their customers. Now that JV doesn't have to use Starlink because, um, SpaceX has made it known that they are, they are being a direct competitor, right? And so from a regulatory standpoint, I don't think the FCC or the DOJ will have a problem if that entity does not buy satellite services from, from Starlink. And, and the way that they'll pitch the, the, the, the joint venture utilizing AST SpaceMobile is that they'll say, well, you know, Starlink has this great service and, and they're competing against us, but, uh, we also want to offer our customers a very robust and wholesome satellite broadband solution to mobile devices. And so we're pulling our resources together and, um, and we're using AST SpaceMobile. And AST, by the way, is bringing this Legato spectrum that, that, so it'll help the service be even better. You know, they'll have low-band spectrum and mid-band. And then grain management, um, you know, that's potentially going to get thrown into this joint venture too. But in the end, the way that the carriers will, will tell the regulators, they'll say, well, we, we're pulling spectrum resources together, but we're still competing against each other in terms of, the, you know, just core wireless business, but the satellite portion, we want to make it so robust and, and a good solution that it's going to benefit consumers across the nation, right? Like this is not only just consumers, uh, in dead spots, but it's also good for, um, you know, areas where wireless coverage is bad, you know, just like 1 bar, which is what, 35% of the carrier's network today. Uh, but then also this is good for national security and, and for, um, you know, disaster recovery, right? So FirstNet, uh, which AST is working with, um, this is going to make that more robust. But, um, but yeah, I, I'm already, I can already imagine the, the regulatory lawyers at, at the 3 carriers ginning up a story that says this is good for the American consumer. We're still going to compete against each other, but this is a You know, as T-Mobile says, this is table stakes. This is a service that is a bare requirement, minimum requirement. It's going to be, you know, my guess is they'll just probably put it in all of their wireless plans, right? And then AST will collect some portion of the total ARPU, or sorry, the value that they sign for this service. But the regulatory story is a lot easier and cleaner now because SpaceX is now saying, We are building a terrestrial network. And my guess is they're gonna leverage the existing Starlink dishes out there. They're gonna encourage consumers, maybe they'll give them a small discount to then put a little base station on their home. Teslas might come into play too. I mean, it's gonna be transformational. Like there's gonna be a portion of people out there that utilize the vertically integrated Starlink solution, which includes your home, but also your mobile device. Do they get 10%? Do they get 15% market share? Who knows? Right. But, but, but AST, for all intents and purposes, is going to have 100% market share of the incumbent MNOs. And so how do you value that? Right. Like we joked about, if you liked the reaction to Verizon coming on as AST partner, you're going to love the reaction when T-Mobile comes on. Right. Because it's going to be—
[00:21:31] Speaker B: Yeah.
[00:21:32] Speaker A: 100% market share of the US MNOs. And so that's a pretty amazing equity story for anybody. And I can understand why the company is, you know, they raised more money recently because they need to go execute. They need to buy more launches. They need to do other things. I mean, there's a lot of exciting things that are going on in the background that they have yet to share with us. But, um, for me, you know, bringing on T-Mobile as a strategic partner, I mean, that's, that's, that's massive, right? And, and I don't know, Starlink, they, they, I think they, they now disclose that they're working with, uh, SoftBank and, um, and NTT Docomo in Japan. And by the way, like those 3, those 2 parties, like they, they have no other choice but to work with Starlink because Rakuten, Has exclusivity with AST. And from what I understand, I don't think Rakuten's interested in giving that exclusivity up. And so, I mean, maybe at some point in the future they might consider it, but Rakuten's such a small percentage market share of Japan. I believe it's in their interest to have, have a differentiated service where they can at least take more share before they open up AST SpaceMobile with other carriers in Japan. But Even if they don't, like, it's kind of, it doesn't matter at this point, right? Because globally, if you look at Europe, I mean, put yourself in Deutsche Telekom shoes or any of the carriers in Europe who are contemplating working with AST or with Starlink. And Starlink on this call just said, oh yeah, we're going to compete for the terrestrial. We're going to build a terrestrial network. We're going to compete for customers. Like, that's the biggest warning shot, like, that you can put out there. And, and if you're the, at the, on the board of Deutsche Telekom, you're, I mean, you're already work, you're already talking with AST SpaceMobile. The nail is in the coffin. Like, there's no way you can work with Starlink. It's, it's the whole Trojan horse analogy where you're just inviting your competitor to get a good grasp of your customer base and then pick them off, right? Like the funny thing. that Mike Sievert did with T-Mobile because they were like, oh man, Starlink, it's sexy. We need to work with SpaceX and try to get more subscribers. But when they rolled out the T-Satellite product, it was Starlink front and center to all the T-Mobile customers. And so they basically marketed T-Mobile, or sorry, marketed Starlink directly to T-Mobile customers for free. And, and, and And, you know, like Starlink, certainly by being able to see where all their customers were on the T-Mobile network, uh, they pinpointed, okay, well, this is where we're going to send our, we're going to focus our advertising for Starlink Home in these markets to go get those customers. Right. Um, I mean, it was like the T-Mobile working with Starlink was the biggest, it will be studied, Harvard Business Case Studies, the biggest strategic blunder By a management team in the wireless industry over the last several decades. And I'm sure of that because they enabled a— they enabled and gestated a competitor and brought it to life, right? And by giving Starlink that 5 by 5 megahertz and that 1.9 gigahertz PCS block or PCS-G block, They were, they gave SpaceX the ability to go test their satellites, to stand up a service, and then SpaceX iterated off of that.
[00:25:16] Speaker B: Right.
[00:25:17] Speaker A: Um, the most difficult thing for SpaceX back then, uh, was to get their hands on any spectrum that can be used for terrestrial service. And, and T-Mobile just gave it to them, which is insane. But anyway, um, yeah, that's, that's pretty much all I had to say. I mean, It'll be interesting, as I said, to see how sell-side research responds to that. There's going to be really tough questions for AT&T, Verizon, and T-Mobile for upcoming investor conferences, quarterly calls. As we saw recently with the T-Mobile CFO and CEO, they've gone from talking about the virtues and how wonderful it is working with Starlink to being a lot more defensive and talking down how good that service is and the adoption. And so you've already seen a strategic pivot, right? And so I think in the coming weeks and months, the media, the sell-side research, it's all going to change. And we just saw it unfold today, which is— Yeah, I'm still kind of Shocked by it. But anyway, um, that's all I had. I, I've actually got to meet a few other Space Mob members. I'm actually at the Courtyard Marriott in Titusville, and we're all gonna get some dinner, and some of us are gonna try to sleep a little early and then wake up for the launch. But, um, but yeah, putting aside this SpaceX news, um, really exciting time right now. We've got Bluebirds.
[00:26:50] Speaker B: Yeah.
[00:26:52] Speaker A: 11, 12, and 13 that are going to launch, uh, in the early morning of tomorrow. And, um, yeah, I'm excited. I'm excited. Um, I know a number of folks, um, are here and we're all going to meet up. And, um, yeah, we're just carrying on the tradition. I, I did want to give a shout out to Steve Larison, our, our dearly departed friend. Um, I was able to share a Dr Pepper with him. I, you I went out to where I buried him, uh, which is behind the hotel here, this beautiful area that overlooks the water and, uh, the Kennedy Space Center. But, um, but yeah, I was able to share a Dr Pepper with him and update him on what's been going on with AST and the community. And I also poured some of the Dr Pepper out where, um, but he's buried. But, uh, it was actually, uh, a beautiful moment. But anyway, that, that's all I got, everyone. Uh, I, I might I might try to do a live space at some point post-launch. Uh, we'll see. But I know, I know Kook is gonna potentially read his entire research piece, uh, prior to launch. Um, God bless him for doing that. Uh, it'll be interesting. But, um, but yeah, thanks everyone for joining. And it is an absolutely exciting time. Uh, we are launching satellites. We've got commercial service coming. For those people who are concerned about launch, we have secured more launch and, um, You know, Bluebirds 14, 15, and 16 are coming not far behind these 3 that are going up this, this, or tomorrow early morning. And yeah, SpaceX has just pretty much admitted and underscored what we've been saying for many, many years that eventually they are going to compete with the terrestrial players, the MNOs, and, and we're, it's really up to us to execute. and get as many of these folks under our belt working with us. So really exciting time. But anyway, I'll end it there and thanks everyone for joining and I'll get— I'll give people live updates as we head into launch. And yeah, looking forward to it. Take care, everyone.
[00:28:55] Speaker B: Bye.
[00:28:56] Speaker A: Bye.
[00:29:09] Speaker B: Thanks for listening to the AST SpaceMobile Podcast. If you enjoyed this episode and you'd like to help support the podcast, please share it with others, post about it on social media, or leave a rating and review. To catch all the latest news about AST SpaceMobile, make sure to subscribe. Thanks again, and I'll see you next time. Listen. Mmm, waffles.