AST SpaceMobile - The Billion Dollar Sovereign Satellite Blueprint

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[00:00:30] Speaker B: So good, so good, so good.
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[00:01:04] Speaker D: This is the AST Space Mobile Podcast. It will just basically come to your phone and be seamless regardless of where you are. We don't want the user even to know that it's connected by satellite. Listen, the opportunity that we have is very, very, very large.
[00:01:23] Speaker B: Hey everyone, thanks for joining today. Another day in paradise. Markets are doing their thing and you're seeing a bunch of weird factor moves. Defensive sectors have done pretty well, even biotech. Biotech recently over the last year has performed pretty well and you're seeing a lot of the Hot areas aside from memory, of course, but hot areas, whether it's quantum or space, crypto, my God, crypto is absolutely dying. But you've seen a lot of factor rotation. Space as an entire sector has been completely brutalized, and we're seeing more of that today. And I talked a bit about the dynamics there yesterday, and it looks like short interest is still Pretty high. I think today it's at 81 million shares real time, and that would suggest that there's more shorting because as the stock has moved lower, the convertible ARBs are covering their shares. So there's still net shorting going on. But, you know, as I mentioned before, I think a lot of that activity has to be related to pre-IPO SpaceX holders who are looking to hedge positions in front of an eventual liquidity event, which will be the time that they can sell the first lockup, which is going to be in August. But anyway, but yeah, it's been a pretty rough June to say the least. And perhaps by the end of this month, once July rolls around, we'll see different dynamics. But I do feel like we are at a bottom or pretty close to the bottom. Of course, it's always difficult to time it exactly, but But yeah, it's been a pretty interesting period. And I would say, you know, it's important to understand that the entire space sector is down and continues to move lower. And so correlations are essentially at 1. And so no matter what news is out there, when you have this type of dynamic, these stocks don't really reflect the news. And so for example, yesterday we learned that Vodafone España, Vodafone Spain, which is owned now by a private equity firm. So Vodafone, when they went through some levels of restructuring, they sold Vodafone Spain, I think it was a year ago. And so they confirmed a commercial agreement, which was just also reiterated by AST SpaceMobile just now, but they've joined Satellite Connect Europe and will be providing commercial service in 2027. And so that's a big Piece of positive news. It's another commercial agreement, and it just reinforces the you know the importance of Satellite Connect Europe. It just makes that entity much more attractive to the EU as they think about the two gigahertz spectrum allocation, which I'll talk a bit more later. But but yeah, it's you know during this period of time, if it's Rocket Lab or Planet Labs or any of these other companies, I've seen. what I view as materially positive information, you know, news released by those companies, awards, you know, other pieces of news that in a normal market would have moved those stocks higher. But that's not the case. You're just seeing a one-way move downwards. And so during this period of time, I think it's important to stay focused and just kind of, you know, it's like If you're on a surfboard waiting, watching the sets come in, you've got to wait for the wave to basically take all the stocks back up. And so in the meantime, don't beat yourself up. Make sure you're not on margin. But, you know, this is— it's not as if AST is in particular the one stock that's suffering. It's pretty much across the board. So don't beat yourself up over it. Make sure that you're equipped to ride this out and eventually the stocks will turn. Especially in light of a bunch of catalysts that are coming up, right? So anyway, I did want to talk about the sovereignty issue. I know I've grappled with this concept for quite some time, and when we learned about Satellite Connect Europe and the desire for Europe to have a sovereign solution, it kind of racked my brain as to how that might structurally work. And then it wasn't until we learned about the Rakuten announcement or Micky Mikitani, I think he's kind of leaked it beforehand, but eventually we'll get some formalized PR. But he talked about the joint venture that they're forming in Japan, which is going to serve as the vessel to deliver on this JLEO project. I think the company for a whole host of reasons is well positioned and also I believe Starlink is unable to meet the requirements of that program. And so I think we're really well positioned to get that. And there's a tremendous amount of economics that go along with that as well as a purview into how this sovereignty issue works and will work in Japan, but then also in Europe and of course the US and other areas as well. But I think it's important. I saw Deep Value Dude. He was on here before. Maybe he switched to anonymous, but he actually— Kook and I were talking about this this morning and we came to this conclusion. But then Deep Value Dude, he actually posted, I think it was like 2 days ago, about how this Jay Leo program could be structured. And I retweeted it, but it's very important because it basically draws on the same conclusion that Kook and I were talking about. which is back in the day, I think Planet and JSAT came into this agreement where JSAT paid Planet, I think it was like $230 million in order to build satellites that would be for use over Japan. However, Planet then had the rights to utilize those satellites when it flew over other countries. And as a result of this, the satellites were paid for by JSAT, but then Planet got the economics to use them elsewhere. And so it's basically 100% gross margin business outside of Japan. And then of course, JSAT kept all the economics in Japan. Now, these things can be structured any which way you want, depending on what the objectives are for each party. But this is a very good example of what the structures could look like. So let's go back to Satellite Connect Japan. So Rakuten, They're forming this joint venture with AST SpaceMobile. The JV is going to be lightly capitalized because there's no need to put any money into it, at least in the near term. The JLEO project, we are supposed to hear about a potential decision in the coming weeks. An internal decision will be made at the end of this June, at least according to the press. There'll be $1 billion of investment into the entity from the Japanese government. And that money is going to be used by the JV to buy satellites from AST SpaceMobile, also buy ground station equipment, everything you need to interface with the satellites, do command and control as well, have staff in Japan. But that's basically standing up a new business. But most importantly, it's going to buy Bluebird satellites. from AST SpaceMobile, and those satellites will be owned by this joint venture, full stop. So they're not going to be owned by AST SpaceMobile. They're not going to be controlled by the US or Europe or some other entity. They will be fully owned by this JV, right? And that JV will consist of Rakuten and also AST SpaceMobile. Now, In terms of governance, maybe this is part of the reason why, you know, Mickey, Mickey Tani stepped down from the board. And of course, you know, he did that partially so he could sell some stock, which maybe is going to go towards capitalizing this company to a degree. But then also by stepping off the board, maybe you have the ability to do more arm's length type of negotiations and transactions. Maybe it's required by the JLEO tender. Maybe that, that, That was a requirement. Who knows, right? But the interesting thing here is that the way this is structured, and this is why it there were parts of it that were confusing to me until it kind of all came to it became you know came to a head and it started to make sense because in essence what's going to happen is this joint venture will own satellites and it will control them. It'll have full control over them, and when it's over Japan, it will you know have the ability to control provide service. There will be a kill switch like everyone. If they want to turn it off, they can turn them off. But then what AST or some other entity, or maybe Emino partners around the world, they will enter into partnership with this JV and they will lease capacity from those birds when they fly over areas outside of Japan. So when those birds fly over the US or they fly over Europe or Africa, Then, then there will be some type of payment to the joint venture to utilize the birds over, over those, those regions. And this is why when Mickey Mikitani— this is the part that yesterday it, it kind of confused me. He said, you know, once we have our satellites up, we will then expand service across the globe. And in my mind, when he said that, I was like, what is he— is he talking about Rakuten actually Trying to provide like a roaming network to other countries, or you know how is that going to work? Right. But then under this essentially a sale leaseback agreement where the bur the ASD Space Mobile satellites are sold to Satco Japan, that statement now rings true, right? Because then once those satellites are owned by the JB, if they fly over the U.S., in essence that JB is going to provide coverage to the United States, right? And and once it's over the U.S. because of ASD Space Mobile's Agreements with with that entity, it will be paying. It will be sharing some level of revenue. Obviously, you know, AST will be part of the joint venture, so it's it's going to be paying itself. But when it's over other regions, it will be paying the JV some level of economics, right? And so, in essence, what Mickey Mikitani saying is when he's discussing rolling out global service, it means that the satellites that we've procured for Sato Japan. Will serve other parts of the world under this global AST SpaceMobile network, but we will derive some economic benefit from that, right? Because Japan is obviously going to be paying $1 billion to procure these satellites, which could pay for, I don't know, 30-some-odd satellites. Then the Japanese entity will get benefit from those satellites when they fly over other countries and regions. And so that's why when he had said rolling out global service initially, I was a bit confused, but then under this structure, it makes absolute sense, right? Because he's in essence talking about collecting payments from those that use capacity when it's flying over a different area. And so now it makes a ton of sense. And I think for those that are interested in learning more, there There was a, uh, there, there's news about the Planet JSAT joint, uh, deal that happened, I think it was like a few years ago, but that's kind of the template of what I think Satco Japan is following. And so, um—
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[00:13:50] Speaker B: This also is important for Satellite Connect Europe because then now it kind of solves the whole concern around sovereignty. Because for those that don't know, which apparently there are quite a few people after I tweeted yesterday. Some news about Satellite Connect Europe. People are some some folks are asking what does it have to do with AST? Well, AST is the prime partner of Satellite Connect Europe. It provides the the satellites and the technology. So so that's why it's important. But Satellite Connect Europe is a joint venture that was formed between Vodafone and AST Space Mobile. Other MNOs have joined the the the largest MNOs in in Europe: Orange, Telefonica, CK Hutchinson, Telenor. And now of course Vodafone Spain, which is separate from Vodafone. It's private equity owned, but Satellite Connect Europe is this joint venture. I think you're going to see a similar type of structure unfold there where— excuse me— that entity or ASD SpaceMobile has already applied for an operating license in Germany for a constellation. Let's call them Eurobirds. And so what this entity is going to do is it's going to buy AST SpaceMobile satellites, and then it's going to deploy them and have full control. And so what that means is under EU regulations around the 2 GHz spectrum allocation, and so maybe I'll talk a little bit about that. In May of next year, there will be a decision on the upcoming renewal of 2 GHz of spectrum. That's about 30 MHz by 30 MHz of spectrum that's currently used by EchoStar, Viasat, and I forget who the other players are, but that spectrum's going to be reallocated and 15 MHz of it is going to be given to European entities. And then the other, maybe it's 10 or 15, is going to be given to potential other users, right? And as part of the requirements around that, Now, Europe is probably going to allocate some portion of that to its IRIS constellation that it's trying to push forward, which for a whole host of reasons, that project is probably unlikely going to see the light of day just given how much bureaucracy and how many companies are involved in that. It's like herding cats is my guess. I just don't know how they'll be able to come up with some solution by the timeline that the Europeans want. But for that 2 GHz spectrum allocation, some of the specifications came out, I guess it was like a few months ago. And of course, an important consideration is that the constellation needs to have EU ownership, which this joint venture Satellite Connect Europe is going to have a plethora of European ownership, especially European MNOs. And then of course, you have to have European operations. And so control centers, Um, the traffic, you know, originates in Europe but needs to land in Europe. It can't be, you know, bounced around in, in, um, different regions, or it can't land in another region and, and potentially be intercepted. Um, and so, yeah, and, and then of course, you know, the constellation needs to be flagged in Europe, which AST has applied for a, um, a constellation in Germany, or to be flagged in Germany. And so the way that this would work is that, um, AST and Vodafone, they'll go to the European regulators, say, we formed Satellite Connect Europe. It's being capitalized. We're putting in some level of capital. And then you have all, basically all the top MNOs in Europe are fully backing this venture with the exception of Deutsche Telekom, which in my estimation, I think Deutsche Telekom eventually will join this joint venture because, you know, I'll talk about the dynamics a little later, but everyone knows that Starlink is trying to basically take, take these guys' businesses, right? And so, um, but going to regulators and saying, hey, we're working with all the, the large MNOs that cover the entire continent, and, uh, this is going to be a European-owned and operated entity, and Satellite Connect is going to buy AST SpaceMobile satellites, and, and we'll call them Eurobirds, um, and so we're gonna have full control over them, right? We, we Fully own these satellites. We are fully going to operate them, and then eventually what will happen is you know once those satellites are deployed and oh by the way this is important too we're going to launch those satellites on Ariane rockets and so or we're going to launch as many as we can on Ariane rockets and so we're we're this is a fully European solution we're using European launch you know you're going to make it as attractive as possible right to European regulators. And so, but with that, this entity will have sovereign control, will have the kill switch, and over that group of satellites, when they fly over the US, when they fly over Africa, over Asia, we will lease out their capacity. And so AST SpaceMobile will then, with another MNO partner, operate those satellites or be able to lease them when they fly over anything outside of Europe and we'll get paid for it. And so that's how that JV would work. And by putting that forward, when going to regulators, they're going to say, hey, this makes a ton of sense. This is truly a European solution. And so because of that, we are going to grant you 10 megahertz by 10 megahertz of this S-band spectrum for use, which is, I mean, I don't need to tell you guys how valuable spectrum is, but that would be a tremendous win for for the company. And so, um, so that's how Satellite Connect would work in Europe. And so in essence, when you, when you kind of look at these things at a higher level, you're going to have sovereign constellations that truly are sovereign, uh, because some group of satellites will be owned by Japan, some group of satellites will be owned by Europe, and then of course the rest will be owned by AST SpaceMobile or US proper. And they will be controlled by those specific regions. And, you know, you'll be able to, once you get to a level where, you know, let's say, I don't know, 100 or 150 satellites, the ability to have your own sovereign constellation will be fully realized, right? And as part of that, it's important to note that because they are all part of the same family and because AST SpaceMobile is a key partner in all these joint ventures, you will have a globally fungible satellite constellation, right? So while certain satellites are dedicated to certain regions, they will be used outside of those regions. And as a result, you will have very broad global coverage. And then of course you get into this, you get into the ability of leveraging multiple satellites over region and enabling carrier aggregation, MIMO, all that stuff, right? But the key thing is that once you are able to demonstrate this and deploy it, it lowers the cost of deployment for the satellites. And then you also meet the requirements of local markets, right? And so I'm not saying like every single country is going to get their own sovereign constellation, but if they're willing to pay for it, or if they're willing to put forward free spectrum, um, then the economics are attractive because you're, you're basically getting all these goodies, um, and the satellites are being paid for and spectrum's being paid for in exchange for, um, of course giving sovereign control for specific satellites. But then those satellites are going to be used by the constellation and they are going to provide service for, um, you know, in these other areas. And so, so it's a win-win for everyone. Um, and this also, by the way, gets around the S-band regulatory issues. and also L-band regulatory issues because obviously the FCC here in the US, they want to favor US players. And so if, let's just make up an example, but let's say in Brazil where we get 10 by 10 S-band spectrum, right? 10 megahertz by 10 megahertz, which is actually what has happened. And then let's say if EchoStar says, hey, well, we have global rights, and so we want the FCC to impose their will on Brazilian regulators. The Brazilian regulators may say, hey, um, we're not, we're not gonna, you know, bow down to you guys. We, we want our own sovereign solution, and we're not interested in leveraging Starlink. And then, um, the FCC says, well, um, in order to, I guess, advantage, um, the spectrum right holders here in the US, if you have a US constellation you cannot use that spectrum out in Brazil. Well, the way that AST can get around this is say, well, hey, we've formed a joint venture with all the 4 top Brazilian MNOs, and they're going to have a certain number of satellites that are dedicated, meaning they have control over the satellites when they're over Brazil. And so these would be mid-band Bluebirds. And then you essentially get around that issue. Now, I think ultimately where this will shake out is that the FCC will realize that in the end, they can't dictate what regions, in what regions, if a regulator wants S-band to be allocated to a certain player, there's not that much that they can do about it. Now, there is reciprocity, like they could, the FCC could try to punish a foreign operator and not allow them to operate over the US market. But I think, I'm not sure how much, what kind of teeth that has. And so in essence, AST kind of elegantly gets around this. And at the end of the day, if you're the US government and the FCC, the fact that AST is able to provide service in these other countries and it's a US solution or it's a partial US solution, they should be happy, right? Over the long run. And so all of this kind of points to the fact that the company, the way it's structured, the architecture. So in terms of the technology, the fact that it's bent pipe, Meaning the satellites are essentially capturing signal and sending it back down to where the signal originated from mobile phones, aggregating all the mobile phone communications, and then sending it down to a gateway in that specific country. From an architecture standpoint, that's very important for sovereignty, right? Whereas Starlink operates a completely separate network, they have full control over it. The satellites can bounce data in between each other. And so you don't really know if the data, if your data, let's say if you're a user in Brazil, your conversation may bounce around and land in the US or it may land in Argentina or somewhere else. And of course, like the concern is that for that specific country, you know, is someone snooping in on that data? Is it being filtered? Is it being captured, saved? Also, Does, if you're in a situation where perhaps you're at a standoff with the US and then, you know, or maybe your ideals don't align with the founder of SpaceX and he turns off the network, you know, what do you do then? Right. Whereas here in these structures, you own the satellites, you have full control over them. And so you get to determine where to turn the service on or off, or, you know, you have full control. And that's really important. And so I think it's important to separate, not only does the technology from an architectural standpoint support sovereignty, what AST's doing and Starlink doesn't, but also Starlink in terms of its structure, as I said before, like they own the network, right? And so they are not forming these joint ventures. They are not going to give control away for any of these, their satellites, because it just, the way that it's architected, it's just not, I don't think it's possible, right? And so if you're thinking about these countries and how they want sovereignty, utilizing Starlink network is always going to have that issue, right? That it's not in your control. It's another entity that has the ability to turn it on, turn it off. The traffic, you don't really know how ultimately where it travels to get to your MNO. Ultimately. And then another important point is that for Starlink, if you are trying to foster— if you're Japan or if you're India or if you're Europe or if you're Korea and you've got a fledgling or decent rocket program, by leveraging Starlink for your direct-to-device needs, you're going to be paying a competitor, right, for launch. And so that's one of the attractive things about AST SpaceMobile in that their satellites, they fit in standard fairings. Part of, I think, the Vodafone idea out of India, that commercial agreement was partially tied to using ISRO for launch. And of course, paying respects to the Indian government, And that goes really far in terms of being able to get commercial access and regulatory approvals. But AST also has the ability to do that in Japan. And so they've been in talks with Mitsubishi Heavy, and as part of this JLEO project, I'm almost, I'm like 100% certain that part of their proposal to the regulators there is we are going to launch some amount of these satellites, 50%, 60%, 70%, 80%, whatever it is, if there is capacity to do so, we're going to use Mitsubishi Heavy. And for regulators, that's a win-win, right? Like you're supporting not only communication sovereignty, but space sovereignty because you're helping build the launch capacity and launch programs of these countries, right? And so similarly in Europe, they're going to go to regulators and say, hey, well, not only are we working with all the top MNOs in Europe, and this is going to be a completely European-owned solution. In essence, AST is a junior partner in terms of the joint venture in extracting service revenues, but they're essentially a manufacturer of the satellites. But we are also going to be able to stand up Arianespace, right? We're going to launch as many of these satellites on that provider Versus, you know, being beholden to, like, if you use Starlink, obviously Starlink is not going to be launched on any competitive competitors' rockets, right? It's going to be solely on Falcon 9 or Starship. So, so yeah, you go to regulators and you say, we've got a complete sovereign solution. It's going to be controlled and owned by local MNOs. And we're also going to support your space program. So it's pretty much a win-win. So I think, you know, when you line up all those things, I just don't— I don't know how AST, and knock on wood, I mean, we don't know for sure, but I just don't know how they don't win. I know there's— that's like a double negative, but I don't see how they can't win the J. Leo project. I think that pretty much is, you know, and for Mickey and Mickey Tani to kind of start leaking details about the joint venture. Obviously, it hasn't been formalized yet and it hasn't been announced, but by doing that, and of course the Japanese regulators talking about granting or allowing the use of 700 MHz cellular spectrum to be utilized for satellite-based directed device service is a big tell. And so anyway, but yeah, this— now it all makes sense. It all makes sense. And from what I understand, Most MNOs globally understand the competitive threat of SpaceX now. I think before it was probably not as telegraphed and so blatant and public, but post-IPO, as we saw in the company SpaceX's IPO prospectus and of course the presentation, They're clearly targeting going after terrestrial cellular service, right? And so they're gonna put together a patchwork of, obviously they've got global spectrum around S-band and they're gonna try to get regulators to approve that where they don't have approval already. And then they're gonna work in partnership with MNOs. Maybe some MNOs fold and they enable SpaceX to provide or become a virtual network operator in certain countries. I don't think that's gonna happen here in the US. But yeah, I think for a lot of these early bandwagon companies, for example, in Japan where KDDI, NTT Docomo, and SoftBank all joined the Starlink train, I think you're going to start seeing some of those players get off fairly quickly, especially if this Jaleo project is won by AST SpaceMobile. So anyway, yeah, it's a pretty exciting time. I know it's really hard to stay focused and people like are lamenting the stock price at $65. I was talking with Kooke earlier today. The last time we were at $65, $68, I remember maybe it was like, maybe we got down to $63. I do remember thinking at the time for a period, I was like, oh man, how are we ever going to get back to $120 or $130? Because we're here at $60 and it's hard. It's mentally hard to make that leap or that math work. But The funny thing is that when you have volatile stocks like AST SpaceMobile, you just need to string together a few updates, right? It could be a period of a week and a half, 2 weeks. And if there's 5 to 10% moves here and there, you're already at $100 in no period, in faster time than you thought possible, right? And so something similar unfolded. I remember we hit, was it $120 in January? And then when we pulled back, over the recent drawdown or just prior to May. And I was telling people, hey, you know, I think you guys should all start loading up, you know, risk, because I think we're going to trade up into the Bluebird launch, Bluebird 7, of course. And of course, you know, that failed. I mean, we did trade up into that and then we went back down, but then we traded up again. We traded up to $130 in anticipation of the SpaceX IPO, but then of course Bluebird had its mishap on the pad and and that was that. But yeah, it's I just keep in mind that these moves down—I mean, owning anything in space is going to be quite volatile, and you're going to have these really big drawdowns. But on the same side, you know, the flip side of the coin, you're going to have these big moves up as well. And so yeah, this is just part of being an investor in space. Never dull day. But I think it is important to stay focused. And when you have these periods, make sure you know what you own, right? Like, you know what you're underwriting. And for the company, we've got the next batch of Bluebirds that are about to be shipped, and you're going to have launch in August. For those people that are following due diligence very closely, I think we have an Antonov large cargo plane that's coming from India, which is where our composite, um, donut rings are made. That's supposed to land in Midland today. And so, um, you know, we might get some news around that. Uh, and for what it's worth, uh, the company going forward isn't planning to use Antonov planes for all of these things. But I think, um, given some of the design changes, they want to turn around those rings pretty quickly. And so my guess is we probably see anywhere between 7 to 10 rings get unloaded. On this trip, or maybe even more actually. I'm not sure. Given that we've solved the stacking issue, you might see more rings get unloaded from the Antonov. But in the future, as this becomes much more, you know, production becomes more stable and we've finalized a design that we're going to stick to, then you're probably going to see more of these rings delivered by boat. Which, by the way, like there could have been some rings delivered by boat already. But for whatever reason, they've decided to perhaps airlift a few more rings on Antonov. But yeah, we've got all this positive news. I mean, Japan, the JLEO project, something that quite candidly most space mob was not following, but then all of a sudden became something important and a billion of potential CapEx and entirely new business. the way, so the way that our— because Rakuten was an early seed investor and because of that special relationship, we actually ceded. Ceded meaning we gave up control of the Japanese market to Rakuten. And so in that relationship, we actually, because of their early gamble on us, we were supposed to not derive any economic benefit from the Japanese market, which is, you know, that mutual exclusivity is also why Rakuten or AST was unable to sign agreements with KDDI, SoftBank, and NTT Docomo. However, this JLEO project, as part of the conditions that the Japanese government has set, you have to be able to provide that service to every carrier, right? And so in essence, this opens up the Japanese market for AST. Now we probably won't get any economics from Rakuten, but from KDDI, NTT Docomo, and SoftBank, we will get economics from those users. And so that's another big upside, which I don't think the market fully comprehends. Well, definitely doesn't comprehend. But yeah, so that's, you know, another important data point. And I'm pointing out all these things because there's a ton of positive stuff that has happened. But as I said before, the space sector is down, sentiment's down, you know, there's been de-risking. And so any positive news is not going to move the stocks. But when you get to this point of When the sector has settled and people, you know, correlations are not intertwined and everything's trading together, you're going to see dispersion, right? And so people are going to look back and say, oh, well, AST has a launch coming up in August and they signed Vodafone España and they won the JLEO project. The stock's going to react to that, right? It's going to reflect that because now the algos and whatever garbage has been controlling the stock along with the others, it's not going to have a hold on them, right? And so then those pieces of positive news are going to be reflected. And the other thing I would say is that in the US, the market still hasn't come to grips with the fact that T-Mobile is going to leave Starlink and is going to join AST. And so that's something going to happen. Although let me look, someone's saying, What is this? Oh, someone. Okay. Yeah, Dave, thoughts on rumors of SpaceX acquiring T-Mobile? Let's see. This is a, okay. I actually saw this note. TD Cowen had wrote that this was their own assertion that maybe SpaceX could acquire T-Mobile. And so I guess it's possible. You never say never, but I will say T-Mobile has become economically more important to Deutsche Bank, or sorry, Deutsche Telekom, not Deutsche Bank. Deutsche Telekom in the past had been selling down its stake in T-Mobile, but then over the last 3 or 4 years, they actually started buying back that stake. And so as most Europeans know, it's really tough to compete in Europe, whereas the US market is very stable, profits are great. And so Deutsche Telekom Reversed its decision and decided that T-Mobile was a very strategic part of its business, and they've decided to increase their ownership. So selling it to Starlink, that wouldn't make much sense if they did. Let's say if Deutsche Telekom did sell T-Mobile to Starlink or to SpaceX, then that would be bad for its remaining business in Germany unless they sold that business as well, right? They sold Deutsche Telekom to Starlink. But I don't think it's something that's in the cards for SpaceX. For SpaceX, I think they're focused on taking share from MNOs, and if they can do that through a virtual network operating agreement, they'll do that. So they'll act like the resell. If they could, they would love to resell T-Mobile service terrestrially and then augment that with their own service and they'll call it Starlink Mobile. But T-Mobile, Verizon, AT&T, and all said, we're not going to enable these guys. But let's say SpaceX did acquire T-Mobile. What would that do? Well, for SpaceX's astronomically high valuation, it would get derated because then you are now, these wireless carriers, let's look, traded at a much lower valuation multiple. They basically trade on, let's see, they trade at, call it 6 to 7 times EBITDA, right? And so you would expect SpaceX, if they were to buy a large MNO like T-Mobile that has, call it $95 billion of revenue and $37 billion of EBITDA, that's a really big contribution financially versus the compute leasing business that they have. And then of course the space business, And so people are going to derate your stock. They're going to say, okay, this company SpaceX should be valued more, you know, call it, let's see, maybe 2/3 of its revenues or more, maybe 3/4 of its revenues are traditional wireless carrier revenues. And the profitability, a major, vast majority is wireless carrier EBITDA. So am I going to value SpaceX like a space company or an AI company? No, I'm going to value it more like a wireless carrier business. And so as a result of that, the entire entity's valuation multiple will come down. And so that's why if I was an investment banker talking to Elon Musk, and if Elon Musk said, hey, I want to go buy a wireless carrier, I would say, well, that's interesting. It would be financially hugely accretive for SpaceX to do so. However, you are going to trade more like a wireless carrier. And so your cost of capital is going to go through the roof, right? Like your ability to raise equity at 100, 200 times EBITDA or whatever it is, that's going to go towards more like 7 times, 8 times. Maybe the blended multiple would be, I don't know, 12 times EBITDA. So you would trade like a high-growth industrial company. Is that what you want to do? Probably not, right? And so, and if you buy a wireless company like T-Mobile, you might be able to juice, you might be able to raise its growth profile. And so maybe the valuation multiple goes up a bit, but you're talking about wireless companies that that grow top line by 5% a year. And so that's going to dilute the pro forma growth of the combined entity. So you would definitely, unless you thought the gig was up, right? You thought SpaceX's valuation's not sustainable. We should use this high currency multiple to go buy a real business. A real business meaning with a ton of revenue and cash flow that's more mature. And that's what, by the way, during the bubble, that's what AOL did, AOL had this crazy, highly valued stock. They went out and bought Time Warner, this old school company, and as a result, they survived. But of course, there was a ton of value destruction after that deal closed. And of course, the bubble burst. And I think you would have a similar type of situation here where people who bought SpaceX hoping for space exposure and and artificial intelligence exposure, and of course now geo-cloud exposure because they're a leasing business, they would be like, wait, I didn't want to buy this company to become a traditional wireless carrier. I wanted to buy the company that is going to disrupt those guys or has tremendous growth or is going to take share from cable and these guys as well. I don't want to be that guy. And so that's where I think a potential deal falls into some big big problems. So anyway, but that's why they wouldn't do it. And also, by the way, like if Starlink bought T-Mobile, that would put every MNO globally on notice. It's like, oh, these guys are looking to eat off our plate. They're definitely gunning for us. So those 30 MNOs that are working with Starlink, they probably per their contract, they can terminate those at any time. They probably are like, okay, we're not working with Starlink anymore because they're here to disrupt us. And so that would, in my estimation, that would accelerate the adoption of AST-based mobile with any incumbents that are left over, right? And so those are my 2 cents. But anyway, that's pretty much all I had. Let me just look and see if there's any questions, as often there is. Let me see. Any questions or comments? So yeah, Dave, I did answer the question about The T-Mobile speculation that if you read, if you read that, it's all speculation by this one analyst. Oh, I guess it's Wolf Research, not TD Cowen. Let's see here. Key is saying the other advantage I think to a country like Japan buying its own constellation is that defense capabilities may be available to them as well. Japan may, for example, like to utilize its These AMT abilities for its own defense purposes, assuming the Department of War allows it. Yes, that's right. So these dedicated birds, uh, a country would feel more comfortable utilizing them for defense purposes. So that, that is a very, very good point. Um, although I would, I would say the Department of War, probably for allied countries that are friendly, they would probably allow use of that technology That use of the technology over over those countries for the regular constellation, but it's a good point. Someone saying, "Afti, how do you feel about this circulating right after they form a JV with AT&T and Verizon, and only AST is on it in on it before the announcement, and then SpaceX?" I have cried foul. Yeah, I had pointed that out. So. Oh, I guess they're referring to this T-Mobile takeover rumors. By the way, again, the T-Mobile takeover rumors—that was in a research report. It's not any; it's not anything. It's not founded on anything real. Let's see.
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[00:45:18] Speaker B: Gitbree, um, I'm not sure you've already covered this, but do you think AST will be able to have 45 satellites in orbit by the end of the year? The answer is no. I've talked— I've said that multiple times on multiple Spaces. Um, the 45 is not going to be doable. It's most likely a target that they hit in Q1 or Q2. Um, but I think the reason why the company is not updating that guidance is because they are in very active discussions to get additional launch capacity. So, uh, you don't update the market on 45 by the end of the year if you don't actually know if it's going to be 20, 25, 30. And so we'll probably find out about that soon. Let's see, is the JLEO contract worth $1 billion in total? Wouldn't it be spread across multiple companies, not only AST? Uh, no, this award is going to one company. Uh, it's $1 billion. From what I understand, it's $1 billion upfront. And then of course there's going to be the ongoing economics. Um, but no, it's going to be just one company, which would be Sat— Satellite Joint Venture. Someone's asking about the T-Mobile again, the speculation. Um, yeah, it's just one guy talking about it. Let's see. Can't Starlink just keep the data sovereign and only use its Japanese gateways? Yeah, I guess. I mean, but who owns those gateways? It's Starlink. Starlink has not, in any of its markets, it has not entered into these types of agreements where the MNO is a joint partner and actually owns the infrastructure. Starlink owns all the infrastructure and they operate the network as a completely separate standalone network. It's not integrated into the MNO's core. So, um, architecturally and business-wise, um, it doesn't make sense. Someone's asking about the chart. Okay, yeah, same thing. Let's see. Give Yeah Dave the mic, he's a massive ASTS whale. Um, okay, he hasn't requested the mic, but, uh, I'd be happy to talk with Yeah Dave. I, I know him. Let's see. Um, if SpaceX and the sector trade in tandem, will they sell SpaceX and close the hedge basket in August once the release is available? Well, I— the, the folks who have the trade on, who own pre-IPO shares that have hedged the space stocks against those shares, uh, because they're, they're trying to, you know, they're trying to eliminate macro risk and any drawdown in the space sector, um, yeah, they will. If they sell their SpaceX stock um, they will look to cover their short, uh, because then the trade in essence has done its job. And they, since they are out of their long, they're going to cover their short. Let's see, let's see. Someone's saying, providing calm amidst the storm, enjoy hearing your insights. Also save the stock, uh, thank you in advance. Um, yeah, I, I mean, well, hopefully this is a calming conversation for people. I, I mean, I'll tell you guys, like, I've My portfolio is down a ton. I'm down 8 digits since the peak. And does it feel good? No. But have I become conditioned to this? Yes. And so maybe I'm taking it a bit better than others. I mean, to be candid, like last night there was a point where I kind of felt sad and I was like, oh man, if I had only done this and this and this, which I guess for trading, from a trading perspective, um, I did sell some of my upside. I didn't sell all of it, but I sold some of it heading into the Blue Origin. And I talked about this yesterday, the Blue Origin mishap, uh, because out of just good, um, discipline, when you've made a decent amount of money on a trading position, you should take profits. And so I did. I maybe took half of what the exposure I had on. And then of course, you know, that evening I was like, oh great, Blue Blue Origin New Glenn 4, they're gonna do a static hot fire and, um, it's gonna, you know, it's a routine thing. And of course it was anything but routine. And, um, I remember on— I have a small, um, portfolio that I have on Robinhood just to access like some of the features on Robinhood. And so I had some, some of my leftover ASTX shares, or no, it was actually just regular— no, it was ASTX shares. And when that happened, the stock went from like $130 to $120. Like, I immediately sold all that position, but that's all I had access to. because of, um, you know, most of my, my, my core position is on E-Trade. Um, and of course, for my core position, I'm not looking to sell any of that stuff because, um, because it's, it's all got built-in long-term capital gains and, and the cost basis is low. So I'm not looking to pay a big tax bill on that, um, just to buy back the shares, you know, 30 days later or whatever. But anyway, um, but yeah, I mean, it's, it's, uh, it's unfortunate, but for those people who've been in AST for multiple years, um, I don't know, you kind of grow accustomed to this and you can compartmentalize these drawdowns, which it's a good reminder too. Like when you, if you are trading some small, some smaller, all of your position during the good times, like don't get overconfident, right? And don't keep leveraging up into positive moves. Like you should be having some, you know, monetizing some of your trading position to have dry powder when inevitable periods of drawdown happened, right? And so I remember going into the SpaceX IPO, um, telling people, hey, look, um, because some people would ask like, is it— is the stock going to, you know, draw down after the IPO? And I was like, yeah, it, it most likely will, uh, but the key question— and this was at the— I guess it was in April or, or May— the key question is like, where will it draw down from, right? So what will be the peak? And of course, you know, it got to one $133. And then of course the Blue Origin mishap happened and that kind of kiboshed the entire sector. But for me, when the SpaceX IPO happened, I thought that we would have maybe at most like a 20% drawdown or something, but I didn't expect it to go down to 50%, which there's also like a few other factors here as well, because clearly There's more stuff going on. You know, in the interim, we've had the market outlook for the, you know, interest rates go from the Fed cutting to then now raising rates. And, you know, I'm a bit on the fence about that perspective because if you look at where oil is, by the way, crude I think has gotten back to pre-Iranian conflict levels. Now, obviously there was a buildup in the crude price right before the conflict happened, but at least from the day that the conflict happened and that big spike higher, that's been completely taken out of the market. So that should be a deflationary impact, right? And so we'll see if the Fed stays, or if people watching the Fed stay the course and think that they'll raise rates by 25 to 50 basis points by the end of the year. But you've had the rates backdrop change, and of course you've had a number of high-risk, high-beta sectors sell off, and then you've had outperformance of defensive sectors and cyclical names that candidly underperformed over the last, call it, 12 months. And so yeah, this is kind of just the movement in the market as well. But anyway, let's see. How would the economics for sharing satellite work? Like Rakuten leases the satellite out to Verizon for $7, Verizon charges $10. Yeah, I think what ultimately happens is if that satellite is over the US, AST will become the sublease of that satellite and it will extract the proper economics from Verizon. So if Verizon pays $10, or sorry, if Verizon charges its customer $10, Verizon keeps $5 and then gives AST $5, and then AST pays some portion And by the way, like, it's not as if the JV will get a ton of economics for use of the satellite over the US because they, maybe the trade-off is that they'll get a lot, you know, Rakuten will get a lot more of the economics in Japan. And so in exchange for that, it'll get less in the US. And so maybe out of that $10, out of the $5 that AST collects, maybe it'll pay $1 to the JV for that specific satellite. Like, that's how it could work. So it all depends. Like if AST shoulders more of the cost to build the satellite and launch it, then maybe the economics are more favorable for AST. Or on the flip side, if Japan fully pays for the satellite and the launch, then maybe for that specific satellite, AST gets instead of 5, um, and paying out 1 to the JV, maybe it keeps 2 and it pays $3 out to the JV. Um, So, but if, again, if you're able to have this like satellite fully paid for and launched, then it's like incremental capacity, right? It makes the network better. And so you're, that would be a very positive economic decision for you. Let's see. All right. I've been going on for quite some time. I think I will cut it there, but yeah, thanks everyone for joining. I think this news around the JLEO project, which then, you know, I see DVD down there. He pointed to the Planet JSAT business deal, which is kind of the framework, which I think now what Satellite Connect Japan will look like, also Satellite Connect Europe will look like, and this JV in the US too, for that matter, could look something like that as well. But yeah, I think all the recent news, putting aside the stock price, has made me super bullish. And so I'm looking forward to when we get back to some level of rationality where you're going to see dispersion in these stocks, where everything's not trading together downwards, where positive news actually gets reflected in a price in the stocks versus you know, when you have positive news and stocks just keep going down. But, um, but yeah, thanks everyone for joining, and, uh, I'll look, look forward to additional news, and we'll probably do a space again soon. Take care.
[00:55:49] Speaker D: Thanks for listening to the AST 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.
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