Kook's Weekly - Is SpaceX Bluffing About Its T-Mobile Phone War?

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[00:00:51] Speaker A: Ollie.
[00:00:59] Speaker C: Good evening, everyone. Thanks for joining. I got a little bit of a crazy schedule for the next 2 weekends. And so I got a red-eye flight tomorrow night. And I gotta watch the clock right now, 'cause I gotta go pick up my daughter. And I'm pretty tired. Last night, I got to my hotel really late, only to get into my room and...
[00:01:17] Speaker A: Oh, no.
[00:01:17] Speaker C: look outside and there's a big commotion. Effectively, a biker gang was outside my window. And so in that moment, I realized when the biker gang was wearing leather jackets that said Gunfighters Motorcycle Club, I decided I was mistaken. It was, it was not they who were too loud. It was my fault because I wanted quiet. So I just went ahead and moved my room instead of— getting into any disagreement with a motorcycle gang called the Gunfighters, which I subsequently found out is actually a group of cops. So highly, highly unlikely they would have gunfought me. But in any respect, I decided perhaps I should move and not ask them to be quiet. So last week, lots of reasons to miss sleep. We had a successful launch. Really exciting, staying up. I'm sorry I couldn't make it. Still struggling with Some upper respiratory stuff, but Ant-Man Man was there with a group of I guess 35 people, which is really crazy. Watching the video right now, it's just every time I watch a launch, it's it's still just unbelievable to me, and I'm sure it will always be unbelievable. So perfect launch right into orbit. Abel quickly telling us that it was nominal, which is great. I think a lot of us learned to very carefully watch. The second stage burn after Nucleon three, but it's onward and literally upward. And so very cool to see. The company did a shorter pre-launch video this time, and to pass the time, what I did is I read the DD out. So if you look at the third tweet, it's now up on YouTube. I did a narrative for about two hours that went through the DD doc in case you. have meant to read it, but we're looking for the audiobook version. Proud to announce that the audiobook version dropped, and it is coincidences of all coincidences that the exact moment that I finished reading the DD doc, they flipped over to the launch video. So makes me wonder whether an ASTS person was actually listening too, and then they went, Kook's done, we can, we can get to the official program now. But what's also exciting is this is not the last launch. And so if you rewind the clock 2 months ago, and with the stock at $72, potentially the same question is in the stock. People were really worried about launch capacity. All of a sudden, the bear narrative flipped from, can they produce satellites, which they still might have that doubt, to can you launch them? And so the company has confirmed that they're finalizing additional Bluebirds at the Midland factory in preparation for their upcoming trip to Florida and launch into LEO. So we're going to have more launches pretty soon. I think we're all kind of waiting for the next date to get rumored. And my suspicion is that it's probably conservative to say the end of September, just because there's some other launches going on that sort of consume the range for a period of time, but we will find out. So I would say at the back part of September is my outside date and potentially in early September as my aggressive date right now. And so with each launch, we get some other snippets of information from the company. And Abel in the launch release said that the technology is designed to provide broadband for direct-to-device But is increasingly serving as a platform for additional capabilities. Always interesting to see the change in the way the system is described by the company. They're giving some clues as to the bigger picture. And so some people might say, well, why don't they just give the full enchilada? There's a lot of reasons why they might not want to do this is For one, if a lot of those additional capabilities are proprietary in nascent markets, it's not always obviously a good idea to tell your competitors exactly what you're doing, especially you might cause them to look at your technology in different ways and try to copy it. Another reason not to do is if you're going to be launching anyway and your constellation has a lot of bona fide services, but then it has a dual use, which also might be very specifically important to national security for the US. It could also not be a great idea to wave the Star-Spangled Banner too prominently on those other uses if you don't have to, if some of those uses might also be better left a little bit secret and a little bit in terms of other people guessing. And so unfortunately, Abello can't spend his day thinking about how to pump his stock all day. That's Our job, and so he's got to be thinking about how to give the appropriate amount of information while not betraying either the actual operational objectives of the constellation or potentially impairing some of the ability to do other business. But the full weight of the government is clearly behind this sector. We had Brendan Carr out this week. Saying that he's clearing the path for D2C and they are making spectrum available, they're getting approvals, you name it, they're doing it. And so it's very exciting to see the FCC making sure that they are not the point of friction for making these technologies come to bear. So for me, the way I read those comments is certainly A hope that this means that the Legato spectrum will be approved on a timely basis, but more broadly, it means that the other spectrum leases are going to get the go ahead. So again, all good stuff, and importantly, ASTS has a seat at the table. Jennifer Manor, who is the senior vice president of regulatory affairs and international strategy for AST Space Mobile, was selected to serve on the FCC's Technological Advisory Council. So we're not outside the room. The company is inside the room helping guide these strategies, and not because of some corrupt purpose or interference with the government for the benefit of one private company, but really to make sure that there's a two-way dialogue between the government and the commercial sector to get the right solutions done on a timely basis, because this government administration is about getting these things out there and not tying them up in bureaucracy. It's certainly an administration that believes in deregulation. It certainly believes in elimination of red tape. And so having a seat at the table is very important because this is groundbreaking technology. If we don't have a seat at the table, how's the government supposed to know how it works or what we need? They've clearly found a solution to that. So the rest of the world is taking stock of what's happening. It's always cool when you launch on SpaceX because then SpaceX tweets something, but they do backbends to not mention the name that shall be unmentioned, which is AST SpaceMobile. So SpaceX tweeted and it got 1.4 million views, and they said deployment of all 3 Bluebird satellites confirmed. Now you know someone over there is saying, if you say deployment of 3 AST SpaceMobile satellites, you will be thrown out the window. And so that's certainly a terminable offense over there, but they have to say something. And so they say Bluebird satellites. And then Gary Tan, who I'm a big fan of, he's the head of YC Combinator, which is really important in the venture scene. Gary Tan picks it up. So I was surprised by that. And he goes, direct-to-phone broadband from orbit, no ground towers required. Doing God's work. I'm not sure if he was doing a play on words with the infamous quote from Lloyd Blankfein, but literally doing God's work by enabling humanity to be connected. So it's not in the ironic sense that the CEO of Goldman Sachs said it many years ago, but the head of YC has an eye for technology, for change. And for great talent, and it's not clear to me that he put one and one together here. But you never know. Very interesting to see him tweet about it, and the fact that the tweet said Bluebird satellites and then Gary Tan directly talks about D to C and no ground tires implies that he understands what Bluebirds are. And the question is, does he draw the connection that this is not about SpaceX's constellation but about a separate one? But It's interesting to see. And so if the leader of the founders is catching on, what about the founder of all founders, Mark Zuckerberg? And so last weekend, seems like it's a long time ago now, there was a really nice tweet by Vinod S. We're going to just abbreviate his last name about a working session with Meta and AST Space Bubble. at their offices in San Francisco. And so it talks about the end-to-end journey, product vision, user experience, network architecture, go-to-market strategy, technical integration. There's interesting— so in my life where my little startup companies have had these workshops with, you know, $100 billion companies, which has happened certainly once that I can recall vividly, these are the things that have happened after a strategic deal. Has been inked. And then usually as part of a strategic deal, then there's these sort of workshops where the teams are getting together. So that's just really an N of 1 for me having seen this, but it just opens the door to what has happened here because we know that Meta has had visits to Midland before with their senior telecom infrastructure guy. And now we have the ASTS team at Meta's office with this type of workshop. And again, N of 1, just from one cook's experience, these workshops for me, have happened after a strategic deal has already concluded, which would make sense to me. And it makes all the sense in the world why Meta would be very interested in this company. So maybe something more has been finalized or is about to be finalized. We'll potentially find out on Monday. Maybe nothing has happened. It's just the progression of what is ultimately going to be a deal. I would just point out that when I see these one-week workshops with all the teams, That's pretty bullish. Meanwhile, we have J.Leo continuing to move forward. And so I think with all things Japan, the writing— and this is another thing in, you know, the Cook Experience bucket, um, it actually was the same company that had the workshop with a billion-dollar publicly traded company— also, uh, has deals in Japan. And it will be the case that you will have deals done in Japan But that still take months to get finalized just because of the board processes over there. But in Japan, truly word is your bond. And so if something is agreed to be done, I've always had it be done. So culture of extreme—I don't know if integrity is the right word—but everyone kind of knows what I'm saying when it comes to Japan. And so we have very strong signals, kind of 99% confidence interval that Jay Leo has. Been awarded to Rakuten and AST SpaceMobile. Now this week, we got AST SpaceMobile getting their license from Japan to operate in the relevant frequencies in Japan, which would seem to be a very positive step forward toward operationalizing JLEO, as well as obviously the AST SpaceMobile service. So was this another click forward for JLEO? Was it an orthogonal milestone being met? Don't know, but we do know that, you know, perhaps a cake that requires a little bit of time in the oven. Jay Leo is something coming down the pipe, should be $1 billion of capital for the company one way or the other. And so some very exciting things that are going on there, and hopefully they can talk a little bit more about it on the earnings call. They were quick to disclose it in the convertible bond offering document, press release from last month. So some more information dribbling out. There was also a really big thread by Katzi on Spectrum, and it's almost too much for me to go through right now, but I've, I've posted it and people can read it on, on their own time. Next we have Blue Origin, you know, always raising their hand and saying, hey, I'm still working on this homework that my dog ate. and I'm, I'm redoing it and it's going to be good. And so they're cranking along, uh, David Limp giving us some updates on what some of us already knew. Uh, you— some people in Space Mob are very good at figuring stuff out real fast, and we had known that it, uh, the anomaly had been caused by a faulty liquid oxygen valve, which is kind of incredible, uh, when these things happen. But as Elon even said on his earning call, we Rockets want to find a way to explode. And so the art of rocket science is trying to convince a rocket not to explode. And so if you have one part that has some failure mode that you hadn't figured out yet, if you do it enough, it will find that failure mode and it will blow up because the rocket wants to blow up. And sure enough, Blue Origin had experienced that on the pad back in May. So they found it, they're fixing it, and they're retrofitting the other equipment, which is great. Means that those boosters can still be used and things are moving forward. So some guy made a funny meme. I don't know if this has already been around. It's the first time I saw it is you had Blue Origin before and then after. So anyway, you know, I think we've had enough time since that explosion on the pad where now we can, you know, Use humor to help reconcile our our feelings of dismay at that failed launch, and sometimes the healing process requires us to laugh. And another guy, you know, clearly an engineer, just did the word cloud on this and valve fail, valve fault. It's always a valve because that's where pressure builds up, and if something goes wrong, kaboom. But seems like Blue Origin is on top of it. So we found out this week the moment of truth for SpaceX unlock was that everyone in the world was worried about the unlock of SpaceX shares. And when everyone knows the same thing, positioning goes too far the wrong way. And sure enough, SpaceX ripped everyone's face off right on the unlock, which was somewhat funny. And so these are the types of trades that I avoid because when it just seems so obvious, then usually the opposite happens. And boom, there you were. And the question we have is, were all these SpaceX guys hedging with ASTS? Stock's up $15 to $18 off the bottom. So maybe there has started to become some unwind or at least a release of the pressure. I'm still seeing some pretty heavy demand for stock loans. So it seems like there's still a lot of shorting going on, but we'll find out. But as SpaceX had its first earnings call, quite a few things came out drawing a lot of attention on the industry. For one, you have Tom Lee, you know, kind of struggled to get words out of his mouth, but starts to talk about Omni connectivity. Oh wow, this is cool. And so they start, you know, they're kind of regurgitating Elon's view of his own service, but trying to figure out, oh wow, we need communications. This is much more beyond dead spots. Machine-to-machine communication needs everything always connected. Yeah, welcome to the club, buddy. And so this is called the expansion of TAM. And so with an enabling new technology, there is a why now answer to the question of why now. Why now are all these services gonna need connectivity? Well, we have an explosion of AI edge demand, IoT devices of all sorts, and certainly changing consumer expectations. And once you have that ubiquitous connectivity, things we haven't even thought of are going to be designed and built to harness and to provide value from that. That's why the TAM, in my view, is going to be so much dramatically larger than what I've modeled in my DD document. I just know that that's my downside case. But then we also have Elon needing to really pump his own stock. I think he honestly believes most of the things too, or at the very least believes some things are possible to inspire his team to to try and then potentially fail fast, but try nonetheless. You have SpaceX taking a new little side project, which is build out a terrestrial MNO. And so the real question is, is this posturing or is Elon actually going to do it? And so Bloomberg has an article saying SpaceX doesn't need to add phone service to Musk's long list of overpromising and underdelivering. Well, they kind of hit the punchline right there. Is, you know, where's my Tesla Roadster? You know, homeboy, before you start promising my SpaceX phone. And there's— I'm trying to think of other Elon promises that just never materialized that weren't even that ambitious. But certainly Charlie Ergen, pretty capable guy, was not capable of rolling out a terrestrial network. Charlie Ergen, who had been in the cable business for decades, knew the ins and outs of everything, had all the spectrum, couldn't get it done. And so it's enormously capital intensive on both sides. You got to build all this, build all this stuff, then you have to attract the customers. I just step back and think simply, who in the world would want to create a de novo MNO? The capital intensity of that would boggle the mind. And then for what? For what's effectively in its current state, a no-growth market with meh returns by incumbents that are marked by desperately trying to do M&A all the time to get out and diversify from their MNO business, which is kind of telling you again, there's no growth in it. This doesn't seem the area where someone should try to spur a brutal market share fight. a race to the bottom on price where you're likely going to be the high-cost player because everyone else has fully depreciated networks. And so it just doesn't make a whole lot of sense to me. And so what gives me more pain than building out a terrestrial network is to quote Tim Ferriss. But in this instance, I will suffer that pain by linking out a video where he's doing an interview. And he certainly is a villain. If you notice, like, only his lower jaw moves and then his eyes and face remain still as if the guy had just washed his face with Botox. He's like just truly a supervillain. And but that said, the supervillain is of the belief that SpaceX is just posturing to negotiate with T-Mobile to try to get an extension of their deal or a better deal. I don't know, because fundamentally, The service is not good, and so I was just having a debate with some friends on even if you took for granted that SpaceX was posturing and trying to negotiate with the MNOs, why would the MNOs even want this service? It's not fully integrated, and so that means it will always be just a roaming service and not offer a seamless service or connection to the users. It's not. MNO core native, never mind that it's your sworn enemy as a potential vendor, it just doesn't make a whole lot of sense why the telcos would want this service, period. It's just unless there's a new angle to it, it just simply doesn't seem like something that is going to have good consumer traction. And so that to me nullifies the idea that this is all posturing. SpaceX could be posturing, trying to get the MVNO angle. That makes sense. I think Npanman has been pretty on top of that, and that really then takes it back as a SpaceX-controlled service. But from the MNO's perspective, I just— I don't get how this is them negotiating with SpaceX versus them boxing SpaceX out. And so the sell side is arriving at that conclusion as well. Piper Sandler said after the SpaceX call, We are incrementally more confident in ASTS. I just think that when people zoom out, ASTS is a carrier-neutral partner from day one. It's how it was built. SpaceX is carrier-antagonistic from day one. It's how it was built. They're not the same. And the result should be that ASTS gets All of the business. So then we had a random press release from ASTS that looked to be full of nothing until we read deeper. And so the headline was AST SpaceMobile accelerates presence across Europe with leading mobile network operators. You know, boring. But then in it, it says beginning integration testing with Deutsche Telekom.
[00:23:26] Speaker A: This episode is brought to you by Google Chrome. You think you know a browser, but Gemini in Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration blog, or finally break down that long article you've had open for weeks. Gemini in Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses. Setup required. Compatibility and availability varies. 18+.
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[00:24:14] Speaker C: Deutsche Telekom is the 51% owner of T-Mobile. So we had already known through— I forget where we had seen this, but we had already known Deutsche Telekom was working with ASTS. But now it's in the press release. And so the pieces are really starting to fall together, and the timing of this is very curious. And so right after the SpaceX call where SpaceX is trying to bully T-Mobile into doing something This seems like the height of passive-aggressive behavior, which is really appropriate seeing as T-Mobile is based in Bellevue, Washington, near Seattle, and a hallmark of Pacific Northwest culture is being passive-aggressive versus dealing with your problems face on, is to do a press release like that. And so is it a trickle of what will ultimately be a flood of news on the earnings call? Don't know, but certainly dropping a breadcrumb for those of us who watch closely to know that things are coming into place. And now when we zoom out, we have a European contributor that many of you know, Battery Commodity. It's Arne Lutzsch, who has a wealth of experience. So he's not just some retail schmuck like myself trying to learn about telecom on the fly. Battery Commodity has done this as his career. So you always want to read his stuff very carefully because this is a guy that you would ordinarily be paying over $1,000 an hour on an expert network call to learn from him because he's actually an expert who actually worked at these companies. And so he points out that if you only count the European mobile subscribers that ASTS is working with, you get to roughly 80% of the European market. Pretty wild. 80%. Europe is larger than the US. So these are big-time market numbers. This is the thing that Gary Tan, so the founder of YC Combinator, and I, if we were friends, we would probably get together before weddings to do thought panels and discussion breakouts. Of course, this is of course what you do before weddings. And we would be talking not about AI, but we would be talking about winner-take-most markets and where we could find those opportunities. Winner-take-most opportunities is the holy grail of growth and VC investing. And so if you see a company that's an upstart getting 80% market share in a big market, you would potentially do what I have done, which is drop everything and devote your life to focusing on it, because that's exactly what I have done and the reason why I did it. And And so these are the proof points that that thesis of what should happen— in my case, I thought this should be winner take most— and then you see that they have 80% share, that means it is happening. So very exciting. And again, we might have the exact same thing happen in the US if T-Mobile flips. So these are important concepts and the type of thing that can sneakily sneak up on the market, and then they wake up and go, Oh, there's an all-conquering hero. Nvidia was just selling gaming GPUs and then Bitcoin mining stuff and some autonomy stuff while its course as an AI chip manufacturer had already been set. It just took a long time for the market to come to the full appreciation of it. These are the types of things you might go, oh, kook, you know, stock's not working, you're an idiot. That can be true. both of those statements, but it doesn't mean that it will remain true over a long enough period. So if your timeline is infinity, then you might be right over the course of that timeline. If we shorten that timeline to maybe a year or two, you also might be right. And so that's kind of my current timeline is 1 to 2 years of people should arrive at this epiphany, especially because of the launch cadence. And so it's easy to lose sight of, oh, we have to launch 45 satellites. You know, you should look at it. It's very possible that we'll have launched 9 satellites in roughly 3 months, and that's only going to pick up from there. And so with respect to how quickly the market sort of has time fly by, you're going to wake up and as you're kind of going off for Thanksgiving, you're going to have already drilled down a big chunk of this constellation. And when you're taking off for the holidays, you might be line of sight done with the 45. And so just always take stock of just how quickly time can pass when, when thinking about investing. And that's what I've introduced in the past in terms of, you know, people getting bent out of shape on delays. Well, as you're getting bent out of shape on a delay, you've already kind of eaten the cost of the delay. And now the right way to think about it is the then current outlook after the delay. So the last thing we'll just talk about is Tanner went over the ViaSat call. I haven't done that yet, but ViaSat, in the words of Tanner, is, my God, this is a dumpster fire. So they're just losing share everywhere. It's a great example of how new technologies can just take all of your revenue. I believe ASTS is that new technology that's going to take everyone else's revenue. And then also ViaSat's JV, Aquatis, looks to be dead on arrival. And so people did the analysis that in their shareholder letter, I think last quarter they had talked about this JV 10 times, in this letter 0 times. So this might be dead. It just goes to show you how difficult it is to compete in this market. And going back to why it in fact might be a winner-take-most market, once you have a big powerful incumbent like ASTS that has already leapfrogged you many times in terms of technology that you didn't even really even know about until last year because you had been dismissing it as impossible. So meanwhile, the company that you had dismissed has been refining it and advancing it for 10 years. Good luck catching up. Never mind that they already have all the spectrum tied up. Never mind that they have the machine that builds the machines tied up and, and you rely on outsourced prime to build your stuff. When you actually kind of unpack the problems with competing, it starts to become nearly impossible. And that's again why I think it's winner take most. So this upcoming week we have the earnings call on Monday. I hope that they can give us some spicy updates. And so it's going to be great to know the things we already know, which is just the production cadence. I would hope that they can give us some more launch visibility. And then of course, it's always great if they can do something that helps inflect the perception of the stock. So whether that's— really, the question is, what does it take to inflect the perception? I believe some additional commercial deals and visibility that show what the revenue path is going to look like could really help a lot. And, you know, we'll find out. So I will be traveling on Monday, so I'm going to try to listen to the call if I can, but I'm sure everyone else will be tweeting all the updates. And so this is what I've got so far. And I just saw in the comment, the point about absorbing delays is The description of the sunk cost in time—that's exactly right, Jack. Good way to say it. So anyway, I'm off. I gotta go see my daughter. Hope everyone has a wonderful evening and talk soon. Thanks for listening. 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.
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