AST SpaceMobile - The $6 Billion Spectrum War With SpaceX

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[00:00:54] Speaker C: Okay, people are giving me thumbs up, so I'm assuming that they can hear me. Is it choppy or no?
[00:01:04] Speaker A: Okay.
[00:01:05] Speaker C: All right, let me start over. So, um, I'm not going to go back to the history of this. Um, let's just fast forward to where we are today. So Grain Management, um, owned 600 MHz licenses, and they, um, in a swap with T-Mobile, they gave those 600 MHz licenses to T-Mobile and an amount of cash. I think it was like $2 billion. And in return, they got this 800 MHz spectrum, which is very valuable. In most markets, it's 700 MHz— sorry, 7 MHz by 7 MHz of uplink and downlink. And as we've discussed many times, as many of you know, low-band spectrum is very valuable. It's the prime real estate out there. It's what gives mobile devices' coverage and propagation. So it allows you to use your phone inside your home, in the subway. It has the ability to penetrate, you know, it can go through walls, in your car. It's much better, and it's the lifeblood of the MNOs, right? So low-band spectrum is what gives people connectivity anywhere, and then you layer on mid-band spectrum for capacity, and then high-band spectrum for even more capacity. But yeah, so the FCC recently approved the sale of the 800 MHz spectrum from T-Mobile to Grain Management. Grain Management is a private equity firm. They are in the sole business of making money. And so as part of the FCC approval, this was, I think, at the end of June, Yeah, it was the end of June. Before that decision was made, AST SpaceMobile filed a letter in support of the transaction being approved, and there we learned very specifically that AST was working closely with Grain Management in order to test using their Block 1 and now Block 2 satellites, testing satellite connectivity over that spectrum. And as part of the FCC approval, GRAIN made it abundantly— made the point that they could deploy that spectrum over AST's constellation. And so it's important to note that AST is the only satellite provider that utilizes low-band spectrum cellular anywhere between 600 MHz to 900 MHz. And so there's no other satellite providers that do that. SpaceX, their direct-to-cell satellites are focused in the mid-band. So call it 1.8 GHz to as high as maybe— well, the first generation is primarily focused in around 1.9 GHz and some spectrum above and below that. The next generation will actually have the ability to utilize spectrum on a wider basis, I think. I mean, I'm just speculating here, but probably all the way down to 1.8 GHz to as high as maybe 2.5 GHz. But, you know, Globalstar's constellation is focused on the L-band and S-band. Similarly, Iridium is on the L-band. No one can utilize cellular spectrum today. Of course, that could change in the future. But so, you know, what prompted this space is this article that came out from Bloomberg. And for— let's see here. So in the Bloomberg article, it claims— here's the headline. I'll just go through it. SpaceX, AST said seeking to buy spectrum valued at $6 billion. And so when I saw this headline, I was kind of scratching my head because I didn't think that Grain Management was looking to sell their spectrum. And so in this article, it claims that both SpaceX and AST are among companies that have expressed interest in acquiring a swath of spectrum held by Grain Management that's valuable for providing wireless phone services directly from space. According to people familiar with the discussions. Okay, so then it talks about how after Grain completed a spectrum swap with T-Mobile, that the FCC approved it, but then called for Grain. And this is part of the public process that we all know. It's not as if this article highlighted some type of new news, but there is a public process And here, let me just pull it up. But it talks about the public process where, as part of the FCC approval, that Grain would have to basically follow through with what they said. So Grain went to the FCC and said, hey, if we buy the spectrum, we want to be able to utilize satellite providers in order to deploy it so that we don't have to build an expensive terrestrial network. And that network is expensive because You have to go to the tower companies like American Tower, Crown Castle, one of these guys, lease out a tower, and then hang radios on it to deploy your spectrum. And that's really expensive. And so the game changer with this FCC is that they are now allowing for spectrum to be deployed by satellite as the primary technology to deploy it. And so you can meet a build-out requirement, by deploying the spectrum via satellite. This is something that Charlie Ergen, back in the day when he acquired a bunch of AWS-3 and AWS-4 spectrum, he had made a commitment to the FCC, I want to build a terrestrial broadband network. As a result of making that commitment, he spent billions and billions of dollars to try to build out a competing network to AT&T, Verizon, T-Mobile, and he failed in that endeavor because it was just really too expensive. On top of that, he didn't really have that much low-band spectrum. I think he had 700 megahertz in a few markets, and I think he had another license, but he relied on AT&T, I think it was T-Mobile, as MVNOs to provide him some level of coverage because he didn't have low-band spectrum. So after billions of dollars of failing, That's when, of course, EchoStar, which EchoStar eventually merged with Dish, got into trouble. And then the FCC said, you guys have not met your buildout requirements, so you have to sell it or lose it. And so that's what ultimately happened. He was forced to sell it to SpaceX. So anyway, going back to this article, it says here that Grain has asked interested parties to submit preliminary offers by the first week of September. Some of the people said, asking not to be identified because the discussions are private. And so Grain hopes to reap about $6 billion from selling the licenses, one of the people said. One of the people. Although the company's plan could also involve leasing capacity, it's also possible another bidder could emerge. So you have to ask yourself, why is this article leaking and in whose interest is it to leak something like this? And so this is kind of a classic ploy by bankers and sometimes attorneys, but usually it's bankers. So Grain's bankers, whoever's working on it, they leaked this to Bloomberg because they want to get the competitive tension up. So initially, and based off of everything we saw from regulatory filings and not only from AST SpaceMobile, but also from Grain, I mean, AST is actually out there testing this spectrum. So it's a very public process. And then you've got these bankers from Grain, and I'll give you another perspective of who it might be as well, but the bankers from Grain are trying to increase the competitive tension and basically tell AST indirectly through this article, hey, SpaceX is here. And so while we're negotiating this potential agreement, and let me just go through the dates. So Let's see. GRAIN has to select a financial advisor by August 7th, and so clearly they've hired a financial advisor. That person is supposed to— or that firm is supposed to administer the satellite/direct-to-device partner selection process, and on the same date, GRAIN must also formally initiate a competitive process to broadly solicit bids from prospective satellite operators. So it's now August 20th, so we're kind of in the middle of that. And it sounds like the first—
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[00:10:25] Speaker C: Round of interest is supposed to be submitted in the first week of September. And I say round of interest, right? 'Cause it's not necessarily buying. There's other ways to potentially utilize the spectrum. And so the next date is November 5th, which is what this article refers to. Complete the competitive auction, the competitive process, and notify the FCC of the outcome through through the you know ECFS, which is the FCC filing system. So effectively, this deadline is set so that they have to select a direct-to-device/satellite partner if they want to deploy a favorable D2D construction regime. Because if Grain does not utilize a spectrum partner, they have to then go build a terrestrial network, which is going to cost. If you think $6 billion is a lot, it's going to cost at least that to deploy the network terrestrially. So it's important to note here that Grain, there is a bit of chicken here because it's not as if they're not going to find a satellite partner, but if they didn't, then they would be on the hook for several billion dollars and multi-years of building out the spectrum. So they can Pardon my French, they can fuck around for a bit to try to increase the competitive tension, but if they end up overplaying their hand and if AST, for example, and SpaceX don't play ball with these guys, then they could end up with a big shit sandwich, because then they have to actually go build out the terrestrial network. That would cost— Charlie Ergen, I think he'd spent like $8 billion and he couldn't even get there. If you like $8 billion, you're going to love $10 billion, whatever the number is. And then by December 4th, the applications. So once GRAIN selects a partner, the parties together have to complete a fully supported satellite application by December 4th, right? And so, and in that, it will— it needs to specify everything that they're going to do in order to meet these FCC-specific Direct to device specific build out requirements, right? So so that's the backdrop. And if you read this article, you know it talks about you know there's one party, one person that was sourced to saying that that Grain wants to potentially sell the spectrum and hopes to reap six billion. So so they're putting out a number, right? So by the way, like when you are in these processes, all the parties sign. Confidentiality agreements. Typically, Grain wouldn't be able to tell AST, and they shouldn't, right? Their bankers should say, oh, there's other parties involved, but you can't really disclose who they are, and vice versa. But when you have these leaks, you're able to do it, and then you can claim ignorance, be like, well, I don't know who leaked that, but it's a way to kind of disclose information and get around legal restrictions, right? And so here, again, they're saying, we're going to take preliminary offers by the first week of September. So that actually is not a public data point. It's actually the whole process is supposed to start on August 7th and they're supposed to select someone by November 5th. So we know when the first round is, right? It's the first week of September. Based off of that, they'll give some feedback to whoever is kind of there, and then there might be another round or some final— they enter into exclusivity with Whoever puts forward the best offer. But here it says they're throwing in a Hail Mary number like, man, if someone pays $6 billion, then they can have it. $6 billion or better. In an ideal world, if you're Graeme's advisors, you're like, oh man, I hope someone— I hope 2 people bid $6 billion and then we can get a bidding war and maybe it ends up at $7 or $8. Who knows, right? Someone might blow their brains out. But it also says, hey, we're not necessarily going to sell the spectrum. We're going to potentially lease it, which I think is the ultimate outcome of this, but we can talk about it more. They also say it's possible another bidder can emerge. Of course they are, right? Because if you're selling your house and you've got 2 bidders, if you have an aggressive real estate agent, you say, well, there's actually a 3rd and 4th bidder here too, and so you better put your best and final or put your best foot forward. And so that's typically, you know, what happens in these processes. But let's see here. I'm just going to go see if there's anything else in this article. I mean, there's just a lot of background here. Okay. So as I said before, I think this article was probably leaked by Graines' advisors because they're trying to, you get AST to put their best foot forward. And my guess is if I was in Scott's shoes, and by the way, we just hired this UBS vice chair as a strategic advisor. Hmm, the timing fits, right? And so what I would offer Grain is I would offer them a similar deal as Legato, right? I would offer them some cash upfront to basically lock in exclusivity with the spectrum, And then it would be on a multi-year, long-term lease, and I would offer them some ups in the business. Maybe you split, I don't know, just picking up the numbers, they get 30% of the revenues generated from it, or 20%, or whatever it is. And so in that regard, AST doesn't put much cash up front. GRAIN also rides the risk, execution risk to a degree, but because it's being deployed by satellite, The build-out requirements, by the way, I think is you need to cover 70% of 90% of the population within 3 years. That should be very doable. And the whole point again is for GRAIN, the most cost-effective and efficient way to deploy the spectrum is to utilize a satellite player. So if GRAIN, let's say if they overplay their hand in AST and and SpaceX aren't playing ball and whoever else, then Grain would be on the hook for multi-billion-dollar build-out, terrestrial build-out, which is not fun. But here, the Grain bankers, they leaked this article. They're trying to get— part of this could be to get AST to bid up, even though Elon Musk just did everybody a favor, whether you believe him or not. He just said, no, this is an absolute lie. We're not involved. Which it could be, when he says not true, it could be for parts of the article. Parts of the article might not be true or the entire article may not be true. So when he says not true, it could be, okay, we're not buying it, but we're definitely interested in using it. And if I was SpaceX, I would absolutely be all over this. So let's look at it from each of the players' perspectives. So let's talk about SpaceX. First of all, if SpaceX wants to buy the spectrum, they will be able to buy it. They can pay the most. They have an acquisition currency. Their stock is whether— I mean, just on any measure, it's a richly valued company. So they can issue stock, they can sell stock and raise cash, they can bid whatever they want because it's a multi-trillion-dollar company. So if SpaceX wants to buy it, then they can buy it. They're not going to have any regulatory issues in terms of antitrust, but the issue for SpaceX is that there's this pesky build-out requirement, which by the way, the FCC, Brendan Carr, he likes SpaceX. So if they don't get there in terms of coverage, 70% of the— 90% of the population in the first 3 years, they'll probably get a waiver and extend that. However, This commits SpaceX to a different platform, right? So it's not as if the V2 satellites can service this spectrum. They'll have to build another platform, call it V2L for low band, I guess. And it will have to have a much larger phased array. And they'll have to perfect the ability to Yeah. I mean, they'll change the architecture. They'll get there. It's SpaceX. They'll get there. But can they develop that satellite within a 3-year timeframe and get it deployed and a full constellation up? Unclear, because they're focused on— and this is one of the challenges for SpaceX is that they're focused on deploying the next generation Starlink fixed wireless satellites. They're going to deploy the V2 satellites for direct-to-cell. So sorry, V3 for fixed wireless, V2 for direct-to-cell. They're trying to do orbital data centers, and then you're going to add a 4th platform, which is the low-band spectrum satellites, which is what AST currently has in orbit now and is deploying. So that's another distraction, and that's more tonnage that you got to ship out to space. And Eventually though, I will say that this should be in their roadmap because if you're going to compete with wireless carriers, you need to have some level of low-band spectrum. Whether you do something around grain management, which might not be a good time for you because you have to meet build-out requirements, then you might look to a handful of other potential spectrum plays. But I think for SpaceX, I think it's important to just say upfront, if they want to buy it, they can buy it. They can outbid pretty much anybody. Now, do they want to blow their brains out on this low-band spectrum? Unclear. And it is a different strategy. And there is a by locking yourself into this spectrum, it also kind of plays your cards pretty early, meaning that if there was— so SpaceX has talked out of both sides of their mouth, where on the one hand, they've said, we want to work with M&Os. And I think Brett Johnson, in an interview with one of the banks, he was saying, or it was Morgan Stanley. No, it was Wells Fargo, their research report. He talked about how they feel very strongly that they can get an MVNO agreement. And part of the ploy to get an MVNO agreement is that there is a bit of carrot and stick action, right? Like on the one hand, you talk very nice to T-Mobile and maybe Verizon. You say, hey, let's do this. Let's do an MVNO. And I promise I won't take your, you know, I won't try to take your customers, but I'll take the other guy's customers. And net-net, you'll be a beneficiary. But then in the public, the stake is that, hey, if you guys, if the industry doesn't help us, then we're gonna compete directly with you. And so there's a bit of talking out both sides of your mouth. If they were to go out and actually buy this spectrum, then that would definitely foreclose the ability to get an MVNO with any of the players, right? 'Cause this is a, the die has been cast. Like we are definitely competing against you guys. We're building a competing service. We're getting vertically integrated. we are going to become a full-fledged MNO, right? And so that is something that may not be the chess piece they want to play just yet. They might want to wait for a bit, and then perhaps they will, maybe they'll buy ATEx or one of these other guys who hold some level of spectrum and go that route. But if they do want to, if there's like an inkling, a possibility of having an MVNO agreement struck with one of these players, doing this, buying Grain Management, the 800 MHz spectrum, that would foreclose that, right? Because then the MNOs are like, oh, they're buying their own low-band spectrum, and so they're definitely competing with us. So what about AST? How would they do something here? Well, I think, as I mentioned before, I think the structure would be some cash upfront, and then you would then have an agreement, a leasing agreement for the spectrum for you pick 50, 70, 80 years, and you offer them some percentage of total revenue generated from it. So it could be, I don't know, 20%, 30%, 40%. I don't know exactly what the economics will work out to be, but it would be more of a licensing deal. But if you're grain, that deal comes with more execution risk in a sense of If SpaceX buys the spectrum from you, they pay you cash, then as long as you get regulatory approval, then you get paid. And then you don't care about what happens to SpaceX after that, because they're a cash buyer, they paid you, see you later, shake hands, and you're gone. In the AST case, you are a business partner. And so that is more of a long-term greedy deal where There is some execution risk there, but obviously from a technological standpoint, the satellites already exist, the constellation's being built. And so that constellation is in the process of being deployed. And so lighting up this additional spectrum is pretty straightforward. However, the risk is that, of course, over time, if there's no execution, then maybe the amount of value that you extract from that deal with cash upfront and then ongoing payments it may not be as attractive. But interestingly, of course, you can kind of have your cake and eat it too. You can do a deal with AST and see if they pull it off. And if they don't, it's not as if the spectrum value goes down. It's still going to be very valuable and you can still ultimately sell it to SpaceX or one of the MNOs, although that is a very limited path, which I'll talk about. But But yeah, I think from a value creation perspective, comparing a $6 billion cash upfront, if indeed that's the number, if SpaceX were willing to pay for that, versus building a true business, where the network is deployed, you have 7 MHz by 7 MHz. I assume that AST would sell the capacity of this network through the MNOs, and probably it becomes part of the JV, then you're going to have very steady cash flows over many years. And as a result of that, the value of that business could be, I don't know, $10 billion, $12 billion, $13 billion. I mean, depending on how much you generate per year and the valuation multiple that people are willing to put on that, that's where you get kind of a home run outcome. Because it's not as if Grain at $6 billion it'll be an okay return. I don't think it's going to be a massive return, but if you wanted to have a multi-bagger type of return, you're going to want to be part of, and this is what private equity does, you want to build a business. And so that would be the attraction of working with AST, which is why they are working together as of now. But also, I guess another thing I would say is From a regulatory standpoint, I mean, this article does help grayen out to a degree because it shows the market and it shows the FCC that through this leak, of course, hey, we're actually running a robust process. And so when they go back to the FCC and say, we've chosen our bidder, or whoever it is, they can say, well, we did run a robust process and it was arm's length and this is who we ended up choosing. But yeah, so for grain, it's a matter of what's more attractive. Do you take cash now and then be done with it, or do you potentially risk it a bit, take a little less cash upfront, enter into a long-term agreement, but take some risk, but you get upside in the business? And so that's the calculation they're going through. And my guess is that that number that was put out in the press, I mean, that's kind of a— and by the way, we saw this similarly where Jay Munro of Globalstar, if you guys remember the early Bloomberg articles, he had talked about a $10 billion number and he was trying to get people to bid up, which ultimately it worked. He got Amazon to pay up. That's what bankers do. They try to create some type of competitive tension and hope for a great outcome. Sometimes it works and sometimes it backfires. So that's kind of a quick overview. I mean, the other thing I would say is that before Musk kind of poo-pooed it, and again, he may have said not true in regards to specific parts of the article. Some parts may actually be true, or I mean, there's nothing to keep SpaceX from trying to license the spectrum either. I mean, they don't have to necessarily buy it outright. But the other thing to consider is the joint venture. So this is the title of the space, JV going varsity. The joint venture could— so going back in time, AST has been working with Grain for quarters now, several quarters. And it's not as if AST has been doing this behind the backs of AT&T and Verizon. They're all in the loop on this. And so part of the Another way to think about this, or another potential outcome, is that the joint venture that's being formed by AT&T, Verizon, and T-Mobile, that could be a structure that is going to hold spectrum. And so when AST talked about potentially the joint venture opening up a 3rd and 4th player, the 4th player could be a new entity that is seeded by GRAIN. So Grain contributes its 800 MHz spectrum to the JV, AST contributes its satellites, and then by that structure, AT&T, Verizon, T-Mobile could get service. They could pay for capacity on the 800 MHz spectrum. By the way, once this spectrum is not utilized and it's nationwide, and so it's not limited to dead spots or parts where there's just one bar of coverage, right? It's actually, it can overlap with a carrier's network in dense areas too. And so that joint venture could serve as a vessel to deploy the spectrum and for each of the carriers to benefit from it, right? And so that's another way, another wrinkle to think about it. If you If SpaceX were indeed really trying to buy the spectrum, and let's say they put forward a bid of $6 billion. Now AST, they could counter and they could try to pay for it, but they're not going to win. SpaceX, if it comes to a pissing match, they'll win. But what AST could do, and if they were bidding on their own, they could offer, I don't know, a billion of cash and then the rest would be stock. And so they could issue that stock to Grain Management. Grain would become a large holder of AST. And for AST, owning 800 MHz nationwide spectrum is very valuable. That's an asset that's going to increase in value over time. And as we've talked about, the constellation can create spectrum alchemy, because you can deploy spectrum very cost-effectively with the constellation, unlike having to build a terrestrial network. And so that's very valuable. But if I was in the shoes of Bell and Scott, my guess is they're not looking to buy this spectrum outright. They want to work in partnership because that's what they do. However, if they did have to counter SpaceX, let's say the carriers wanted— the carriers view this as a competitive threat. And they don't want it to be in SpaceX's hands, they want to help out AST, but of course they're not helping AST just because they're nice guys. They would be doing that because they're interested in the spectrum and they want to deploy it themselves. The way you could do it is they could fund the JV with several billion dollars each, and AST contributes its satellites and maybe some cash as well, and then that entity goes and bids for the spectrum if it needs to be bought outright. And so that's where having the financial heft of the 3 carers would be helpful. And so that's why I think— but a JV is messy. It's not as if that entity could act quickly and it would be kind of a tough thing to get 4 different parties to agree to do that. And so it's not the most elegant solution. But yeah, and I think going back to AST, from their perspective, one thing to consider is that AST already has L-band spectrum through Legato for them. And this, again, this is why I don't think they want to actually own this, but if they were to go out and purchase this spectrum for, I don't know, let's just say they were able to do it for $4 or $5 billion, then they're sitting on a decent pretty decent amount of spectrum holdings. However, through that ownership of spectrum, they would be selling services through the MNOs. So that's a lot of spectrum to sit on where then you have to rely on the MNOs to sell capacity on your behalf. So I'm not sure that's something that they want to fully commit to because low-band spectrum, I mean, it's very valuable and useful, But yeah, I think, I mean, there's a lot of different wrinkles to this, but I think ultimately, if you believe Elon Musk, SpaceX isn't really there to buy it. They could license it. My guess is that AST is definitely not going to buy it. They want to enter into some type of relationship. And this is something that's going to benefit GRAIN, right? Because in a licensing agreement, Remember, GRAIN needs the satellite guys. They need the satellite guys to deploy the spectrum. Otherwise, they're going to be on the hook for building out the terrestrial network, which is really expensive. And then from the MNO's perspective, they will likely— it's in their incentives to keep this out of the hands of SpaceX because they do not want SpaceX to have low-band spectrum. Although ultimately, if they get it, then it is what it is. 7 megahertz by 7 megahertz is great for coverage, but it's not enough to compete against the carriers. And so if SpaceX does buy this spectrum, they'll have to go buy other spectrum as well, low-band spectrum to build something robust, but it's a good stepping stone. It's a good start. So anyway, but those are my thoughts. I mean, as I said before, I think grain management's bankers have put this out there. They're trying to drum up interest. They're trying to create some competitive tension to get the best possible deal. This is what happens in the M&A world. And here, of course, it could be M&A or it could just be some type of licensing agreement. I think for SpaceX, if they wanted to buy the spectrum, they're going to buy it. They can outbid anybody and they have the currency to do it, to blow their brains out. But there's sort strategic considerations. Can they meet build-out requirements? They have to deploy another satellite, another architecture, and they've pretty much foreclosed the ability to work with AT&T, Verizon, and T-Mobile. For AST, it's likely going to be a licensing deal, and then maybe they'll provide some cash upfront, but they're helping Grain meet their build-out requirements. And so for Grain, it's From their perspective, do they see upside in a startup, basically a startup, Starlink Mobile, who's trying to break into the market, and how big is that going to be? Although I guess in a cash transaction, they really don't care. They just get the money and run. Or do they work with AST and get some upside in the business where the service is going to be distributed on behalf of AT&T, Verizon, and T-Mobile? that seems pretty damn attractive. And so I think that's why early on you've seen GRAIN work with AST, obviously because they have the satellites to do so, but I think that's probably where this is heading. And then finally, for the carriers, keeping this out of SpaceX's hands. And I forgot to mention, from an antitrust point of view, AT&T cannot buy this spectrum. because they run afoul of the spectrum screening rules because they own too much. Verizon could possibly do it, but they still have the same issues. And then of course, T-Mobile, they just got rid of the spectrum. And so if there's a way to have this spectrum utilized by AST and to build a more robust service that counters SpaceX, I think it's probably in the 3 carriers' interest to go down that route. But yeah, there's a lot of different wrinkles here, and it's never a dull day. We will, as I mentioned, the deadlines before August 7th, we're past that. They have a financial advisor, they've started the process. The first week of September, they'll get some indications of interest. November 5th is when they're supposed to select the party they want to go with, and by December 4th, they need to file with the FCC a fully baked plan for approval. Now, one thing I forgot to mention is that this article out there is kind of fun because it says SpaceX and AST, and a lot of people out there are gonna be like, who is this AST Spaceport? What is this? Like, why are they competing? How are they competing with SpaceX? And so this is just part of the process of people learning more about this small company out of Midland. where they're going to do some digging and find out, oh, there's a really interesting company doing something here, and somehow they're working with AT&T, Verizon, and eventually T-Mobile and a bunch of other MNOs. So this is good for awareness. I will say what's kind of funny is I think it was Tut reached out to me and I was having dinner with the family and he called me and then I saw and I couldn't answer it, but then he showed me the headlines and I was like, what? Oh, interesting. And then I went to look on Bloomberg under AST and the article wasn't there. And I told him, there's no article on Bloomberg. But then he shared a full article he was able to find. And then of course, when I looked under SpaceX, the article was there. And so funny enough, when they first published it, they did not tag AST's ticker. So when you look at Bloomberg under the AST as current news, it didn't show up. Of course, now that they've revised the story with the quote from Elon, now it shows up under AST. So even Bloomberg, the news service who broke this story, did not have it filed under AST. So that just shows you the little respect or even awareness that people have of the company. But yeah, those are my thoughts. Let me just take a look and see if people have questions. Let's see. Another Smith. Yes, SpaceX wants it. They will have to pony up the cash now. Grain won't lease to SpaceX because Grain would carry the risk of losing the spectrum to the FCC, failing to build out, or the cost of build out. Huge risk. Yes, that's 100% true. So what Another Smith is saying here is that if SpaceX wants it, Grain would not want to. They'll probably have to. They don't have to pay for it in cash, so Grain has no risk on the back end. This is a good point, which I didn't talk about. If SpaceX tried to lease it from Grain, the issue is that SpaceX has not developed a satellite that can use this. So it's going to take, I don't know, a year and a half, 2 years to build a satellite, and then you've got to go launch them on Falcon 9, which they obviously have the propensity to do, or of course Starship. Then you've got to have enough coverage to cover 70% of 90% of the population within that timeframe. So that is a big build-out risk. Then if they fail to do this, then for GRAIN, they've got to then flip to their terrestrial plan, which means that they've got to spend billions of dollars to build it out, build out a terrestrial network. So that would be a huge risk. So this is actually Good points by Another Smith, as he always has. Good points. Let's see. Do you think AST should play chicken and tell Grain we are walking away? No, no, I— you wouldn't play chicken for AST unless, of course, like, there's real fishy stuff going on. But this is just part of the process. Like, this stuff happens, leaks happen, they try to get people to do things, and This is not the first time it's happened. I would say for AST, you never see articles about the company because they don't leak stuff and their advisors don't leak stuff. Whereas for SpaceX, or I guess in this case, Grain, there's always stuff that gets leaked and it's to get people to move one way or another. I think again, in this instance, it's probably Grain's bankers leaked this. The other— oh, well, I guess the other thing could be SpaceX could be taking a look, as they should, right? As part of due diligence, they should be part of this process, and it could be their advisors that leaked this too, because they're trying to get AST to blow their brains out. But I will say, if you look back at the Iridium sale process and also the Globalstar process, I didn't think AST was one of the parties, but there could have been One of the parties in Iridium might have been AST, which I thought— I said it was SpaceX originally, but I think that could have been AST as well. But in that process, that bidder, I think it was Party A, they bid what they bid, and then when the bidding went beyond that, they just didn't come back. And so I think my guess is AST. This is a nice-to-have, it's not a need-to-have. And so similar to I guess if they were to contemplate Iridium, it would be an interesting thing to have, but not a need to have. They're not going to blow their brains out. Right. So let's see here. Excuse me.
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[00:42:40] Speaker C: Looking at other comments here, this was likely leaked by Grain to increase the value of their spectrum as they negotiate deals for its deployment. whether with AST or in an AST Legato-style deal or with others, should be a win-win regardless. Yeah. So it is kind of funky. As I mentioned before, if AST wins it, then that's great as long as it's an economic deal. If they overpay for it, then that's not great. But I think we can trust management in what they're doing. And by the way, when people ask, what was a convert for? Well, clearly this was part of the reason why they raised the convert. They wanted to boost their cash reserves because if they want to put forward a $500 million or billion-dollar upfront payment, then this would be an easy way to do it, the convert. But yeah, I think when you say win-win, if SpaceX does buy this spectrum, then that just kind of turns up the fire under the MNOs, under their butts, right? And it kind of locks in the strategic landscape, right? Where it truly is SpaceX becoming a vertically integrated facilities-based MNO who is looking to eat everybody else's lunch, right? And so that increases the strategic importance of AST to the incumbents. And so that's positive, right? And then, yeah, I think, but obviously, in terms of quality of service, it would be nice for AST to have the spectrum, but up to a certain point, up to a certain cost. But beyond that, if they, I don't know, I'm just making this up hypothetically, but if GRAIN was like, hey, we want you to pay $10 billion in cash upfront, use it or lose it. If I was AST, I'd say, go pound sand. That's not economic for me. I'm done. Watch them end up doing that. But anyway, let's see. During the earnings call, the company said JV opens up a 3rd and 4th customer in the US. T-Mobile is obviously the 3rd, but who would the 4th be? Xfinity? Any other crazy speculations on that? Well, we talked about this before. The 4th player could be It could be Comcast. It could also be Spectrum, in terms of cable guys. There is a smaller 4th potential player MNO called Spire, which is a smaller regional MNO. That could be the 4th, or the 4th player could be Grain itself. So Grain becomes a it starts its own business and is able to— it owns the spectrum, it gets a part of the upside in the business, and then that service is deployed over AST SpaceMobile satellites and then resold through the MNOs. So Grain becomes a part of the super wholesaler in the US so that they could become part of the 4th player or be the 4th player. Let's see. Dear God in heaven. So if the bankers leaked it, would grain management know that it was being leaked with plausible deniability, or would the number $6 billion be a best guess by bankers what could move? Tell us how the sausage is made, please. Thank you. Yeah, so the leak would definitely be something that grain management would know, but yes, they would also have some plausible deniability. But this happens. This is like, this is how processes go where parties, you're trying to get people to move. So let's say there's 3 bidders. They don't know who the other bidders are. And sometimes if you're a sell-side banker, you might be telling, let's say Party A, Party B, Party C, you might be telling them, hey, if you want to get to exclusivity, exclusive talks, you need to bid $6 billion. And then Party A and Party B are like, I think you're full of shit because I don't think anyone else is there, nor are they bidding $6. And then what you might do is you might go to the Journal or you might go to Bloomberg and say, hey, so we're in the middle of the sale process and there's 3 parties, and you actually name who they are. There's Verizon, AT&T, and T-Mobile. Let's just make it up. T-Mobile is thought to be in the lead with a $6 billion bid. The company expects to have final bids submitted in 2 weeks and enter into exclusivity with the winning party. So that's what you might leak to the Journal. So even though they signed confidentiality agreements and they're not supposed to say who is there, all of a sudden everybody knows with perfect information who's there. It's like, all of a sudden, AT&T and Verizon understand that T-Mobile's there for $6 billion and they're like, shit, we got to raise our bid. They weren't bullshitting. There's actually other parties there. Now, of course, when the journalists get that story, they try to vet it. They try to talk with a number of other parties to make sure that they don't go out with information that's wrong. Sometimes they actually get it wrong because they're fed BS. But generally speaking, like for Bloomberg, I'm looking at Kelsey Griffiths. I don't know this person. I do know Michelle Davis. I don't know Rashmi Basu, but generally like reporting from Bloomberg and Wall Street Journal is pretty good. But yeah, I mean, here it talks about according to people familiar with the discussions, people familiar with the discussions typically are advisors. When it's principals, let's say if they actually talk to people at the company, it would say, people with direct knowledge of the matter, whereas this is people familiar, so it's people on the outside, or it's bankers, or it could be actually secondhand or thirdhand. So yeah, I'm pretty certain this is Grains bankers that leaked it, and it could also be SpaceX as well, because they're trying to get AST to pay up, and/or, I mean, another reason why SpaceX would help this story is they're trying to scare the shit out of the MNOs to give them an MVNO deal. They're like, hey, if you guys don't— one of you guys don't give me an MVNO deal, then I'm going to go buy the spectrum and I'm going to go compete with you guys. So that's another potential reason why you'd do it. Let's see. So I think that's it. Yeah, those are my thoughts. So we'll see how things go. Again, I just retweeted the timeline for Grain management, and for those people who've been following it very closely, it's been expected that AST would work with Grain. And yes, there would be an arm's length negotiation and solicitation of other potential players, but in terms of the actual technology, the business proposition, the business model, and the potential upside, I think AST has the best to put forward for grain, unless of course SpaceX comes in and decides to pay all cash with no risk to grain, then there's not much you can do about that. And as I mentioned before, it would be nice, but it's not a need to have. And if SpaceX does that, then that just throws down the gauntlet and the die is cast. They are full-fledged, definitely competing, no doubts about it. it, they're competing against the MNOs, and that's a good thing for AST. With that, I'll end it there, and thanks everyone for joining. Bye. 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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