Anpanman - Dancing with the Tiger: Starlink’s European Struggle and the Rise of AST SpaceMobile

[00:00:06] Speaker A: This is the AST SpaceMobile Podcast.
[00:00:09] Speaker B: It will just basically turn 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.
[00:00:25] Speaker C: Hey everyone, thanks for joining this morning. I figured I'd do a short space here, uh, 'cause there was some interesting comments that came out of T-Mobile at their presentation at Morgan Stanley's TMT conference. And then of course, we did get some interesting comments as well from Deutsche Telekom CEO, uh, and this is all in regards to Starlink. So before I start, I, I did wanna say, um, Obviously the market looks pretty rough out there. It, I think the economic numbers, it looks like jobs, job, there was a, there was an estimate for positive jobs, but it actually came in negative, quite negative. And so we're kind of, we're in this environment where because of the Iran conflict and of course oil spiking, the Fed potentially is a bit hand-tied because, you know, obviously folks are hoping for interest rate cuts, but then if energy prices continue to stay high and that drives inflation, then that makes it tougher. And so in a normal environment where these bad job numbers might have spurred the Fed governors to potentially cut rates, now they've got to be somewhat careful just given that energy prices are now spiking. And so we're kind of in this this no man's land where it's tough. And then of course the uncertainty of if the Iran conflict continues to go on for a longer than expected period of time, and then the uncertainty if that continues to unfold and expand beyond just a conflict with Iran, but then potentially drawing in other Gulf nations. And so today I think You know, you saw negative economic, you know, economic numbers related to jobs. And then, of course, you know, Trump, I think it was this morning, tweeted that he wanted absolute unconditional surrender of Iran before they would stop. And then, of course, you know, at that point, he wants to put in an acceptable leader that, from their perspective, that they, that, that he would approve of. And so. With those types of comments, you know the market is is not going to take that in a positive way, obviously because that if you're looking for absolute unconditional surrender, that means probably that the conflict's going to keep going. But I think it's important to keep in mind that Trump this is part of his brand where he will always come out with a very extreme position and and that's that's how he negotiates right like he he will beat up. He'll put up something that seems impossible for the party that he's negotiating against, and whether that's like Europe or Asia or, I mean, you pick any number of countries, businesses, or whatever, he'll put something out there that seems impossible and then he'll walk it back. And that's kind of negotiations 101, maybe not. Well, his brand of negotiations is quite extreme. Because you want to get to a point where you meet somewhere in the middle or somewhere where you feel like you've gained something. And I think Trump putting out these statements, it's putting the Iranian theocratic regime on notice, but I don't think he's going to stick with that level of extreme view. And so, I mean, that's where, for example, the whole motion of Taco came from. I won't go into what that acronym means, but for people following markets very closely, you know, he comes out with something really strong and then, you know, there's this perception that he chickens out or backs up, but that's just his style. So yeah, it's going to be an uncertain environment. You know, things are going to be somewhat rough. And just a reminder, you know, AST, yes, it hit 104, 105 recently, and that's You know, kind of an interesting thought exercise where if we didn't have this uncertain backdrop in the war, where would AST be trading now? You know, I would assume it'd probably be in the $110, $120 levels, but here we are, we're at $90, which is not bad. You know, last week we were at $80, you know, $78, $79. And so post-earnings, the stock is still up anyway. But I want to get back into, before the market opens here, I want to get back into these comments. And so At Mobile World Congress, which concluded today, Deutsche Telekom obviously announced a partnership with Starlink that they've said service would arrive or get launched in 2028, which is predicated on the next generation Starlink satellites being launched. And the reason why that's important is that the current constellation of 650 direct-to-cell satellites, those are what we all know as inferior technology where they can't, they're moving cell beams. They can't actually project down service in a very precise way. And it's low data rate as well. And so for a company like Germany that has nations that border it, having a satellite service that is able to intricately beam down service is important. So Starlink's direct-to-cell current service, 1.0, is not usable. And so they did announce this agreement where they're planning to launch in 2028, and that's predicated on V2 getting up, and that's reliant on Starship becoming commercially viable. On top of that, it also requires 2 GHz European-wide spectrum, which is coming up for reallocation in May of 2027. So a lot of things have to happen and go their way. And Deutsche Telekom made this announcement because obviously they're going to try to help Starlink and Elon Musk get a 2 GHz spectrum allocation, which, you know, they are essentially stepping into the shoes of EchoStar, which needs to get renewed. And so this is no small order. Deutsche Telekom CEO, I quote, SpaceX, the Starlink people are very aware about the political role and the power we have at as a brand in Europe. And so it's clear that they will need every ounce of political goodwill to go to bat for them in order to get an allocation, just given that, for example, Elon Musk has said many times that the EU should be abolished and shouldn't exist. And so from a regulator's perspective, that probably puts you in a hard place, right? Because I think Obviously Starlink is a very important service, and if you are trying to work in partnership with the US regulators, do you upset them and not give Starlink a license, which they're taking over EchoStar's license, or do you give them a small allocation, maybe 5 by 5, and call it a day? My guess is that's what they probably do, but you probably don't go out of your way and do Starlink any favors, just given that the The you know the the CEO of the company is calling for the abolishment of the very organization that you work for, which is the EU. Right? And so interesting dynamics there. But I think one of the more important takeaways from this interview that the the CEO did with a journalist over at The Information specifically, you know the CEO Hotges. He pretty much said that they— here, I'll read the sentence. He added that Deutsche Telekom will absolutely work with other direct-to-cell providers in Europe if they can compete with Starlink. And so we all know that Satellite Connect Europe, which is being anchored by Vodafone, and then Orange and Telefonica are in that partnership as well as a few other European carriers. My guess is that they're talking to Deutsche Telekom, right? And so if that entity does get a spectrum allocation and service is launched and it's good, I would expect Deutsche Telekom to work with Satellite Connect Europe, right? Because that service is going to come online sooner than Starlink V2, which is 2028. Recall that that service also requires that new mobile phones be used because the current mobile phones can't utilize that MSS spectrum. And so you're going to need an entire ecosystem to form in order to get that spectrum deployed. And the same goes for AST, by the way, if they get an allocation of that 2 GHz spectrum. However, Satellite Connect Europe, which will be part of that, they can launch service sooner because AST is going to utilize carriers' cellular spectrum, which is what the Block 2 satellites, the constellation that's currently being put up, is going to utilize. And so If you had asked me in 2024, right before the news hit, hey, do you think Verizon would ever work with AST SpaceMobile and AT&T? I would've told you, go pound sand. There's no way that that could happen because AT&T, from a competitive perspective, why would they let somebody else in? They're going to have all the marbles. But then Lo and behold, AT&T decided to bring Verizon into the fold because they saw the opportunity to bring in a competitor and lock up the US market. And from a competitive standpoint, take subscribers from T-Mobile. The other thing is like, we're very wary of Starlink as a potential competitor. And so Verizon brings their subscribers and spectrum and market muscle. maybe, you know, we'll be in a better place. On the spectrum side, obviously Verizon owned a significant, you know, if you can imagine a puzzle piece, they owned a big piece of the puzzle of 850 megahertz spectrum, and then AT&T owned the other piece of the puzzle. And so by joining together, they were able to create nationwide 850 megahertz spectrum that AST will be able to use. And so it made strategic sense to bring them in. And the reason why I bring Verizon up as an example is that back then, I thought there was like absolutely no way that this could happen, right?
[00:10:53] Speaker B: But it did.
[00:10:54] Speaker C: And there were actually some clues around that where if you looked at FCC filings, the FCC actually kind of forced this to a degree to happen under Jessica Rosenworcel, where part of the supplemental coverage protection space requirements were that you needed contiguous spectrum Or at least in the first iteration, you needed contiguous spectrum. And so it kind of, I remember Cook, when we were looking at these filings, he was like, hey, you know what? The way that this could work is that Verizon and AT&T would work together. And he actually tweeted about this and I was like, you're outta your mind. And of course it ended up being right. And so these are like the little breadcrumbs, the nuggets that you look for of things to come. Right? And so for Deutsche Telekom, here you have the CEO. I mean, it's coming straight from the horse's mouth. Like, one, we don't— we're leery of working with, you know, Starlink. I mean, specifically he said, you know, today the financial size of our Starlink deal is pretty small and they don't plan on investing in Starlink's IPO. And then he said this, I'm not naive. I know this is dancing with the tiger, Höttges said, of working with Musk. And so He's acutely aware of the competitive dynamics that one day enabling Starlink could be detrimental because they will have— they're building global MSS spectrum. It's not ideal for cellular service. Obviously it doesn't have coverage and propagation characteristics, but it's going to be a service, right? And so he knows that that's something that they need to be aware of. And By entering into this agreement and trying to help them out, there's a ton of optionality for Deutsche Telekom, right? Like it's not going to launch until 2028. They're going to see how this plays out. And because of what we learned in this article, it's not exclusive, right? So Deutsche Telekom can totally work with AST SpaceMobile once the service is up and running. And so anyway, I think, oh, you know what, guys? I actually got to hop. Because someone is here, but I will just add at the end that T-Mobile will— today the CEO pretty much said that they will not enable Starlink to become a mobile virtual network operator. And so that was one of the most critical strategic questions I had in mind, where if T-Mobile was willing to just give away the marbles, and allow Starlink to become a full-fledged mobile network operator. And here, Srinivas Gopalan pretty much said, we have no interest in doing that. And that's probably going to be music to AT&T and Verizon's ears. But I would say the important strategic implication of that is you're seeing some thawing, right? And so if you could imagine a world where Gopalan goes to AT&T and Verizon and says, hey, I don't want to enable these guys, but I don't want to initially work with them. Can you guys let me in on this AST SpaceMobile service? If you don't let me in on it, then I'll enable Starlink to become a mobile virtual network operator. You could see a world where AT&T and Verizon say, okay, you know what? That's worth it. We don't want Elon Musk as a full-fledged competitor. We'll let you in. And so that's a potential path where T-Mobile could work with AT&T, Verizon, and AST SpaceMobile. But anyway, I got to hop. Unfortunately, I've got an appointment here, but I just wanted to drop a few comments. I'll talk a bit more about this perhaps over the weekend, but this is big news. And so I think, yeah, the market sucks. You know, it's going to do what it's going to do, but do not Do not miss the discounting of this news because it's big. It means that Deutsche Telekom is open to working with Satellite Connect Europe, and there is a pathway for T-Mobile, which, by the way, their exclusivity with Starlink ends this summer. There is a path, a strategic path where they end up working with AT&T, Verizon, and AST SpaceMobile, and that would be to counter any potential Starlink move to become a full-fledged operator itself. So I'll end it there. Thanks everyone for joining, and we'll talk again soon.
[00:15:15] Speaker A: 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.
[00:15:36] Speaker B: We're doing something very very big, and I think with this technology we can really affect a billion lives. AST SpaceMobile is the only company that has proven technology to deliver cellular broadband connectivity directly from space to the everyday smartphone. People will just basically turn on their phone and be seamless regardless of where you are. We don't want the user even to know that it's connected by satellite. Our role is to bring this into reality, always in partnership with the animals.
[00:16:17] Speaker A: Listen. Mmm, waffles.