Starlink Just Showed Their Hand - And It's a Gift for AST SpaceMobile

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[00:01:03] Speaker C: This is the AST SpaceMobile Podcast. We will just basically turn 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. Listen, the opportunity that we have is very, very, very large.
[00:01:22] Speaker D: Everyone, thanks for joining for this very important space. Um, we had some breaking news overnight, uh, from the FT. It looks like the gloves are off, the mask is off. Starlink has pretty much told investors that they're seeking to attack the terrestrial wireless market, meaning they are planning to launch Starlink Mobile and it will be sold directly to consumers. So not through MNOs, but in competition with MNOs. And I'll talk a little bit about how that product might work, at least in the near term and then the future as well. But this is a shot across the bow. They are going around their partner T-Mobile, and of course will try to sell to AT&T and Verizon customers as well. And so I think the key takeaway, if you don't hear anything about what I'm about to say, or if it's over your head, the most important thing to remember is that AST SpaceMobile's strategic value has gone up exponentially. It's gone through the roof, right? So now you have a point in time where Starlink is, yes, they're going to say to their MNO partners, hey, we want to work with you and we're going to be complementary, but the cat The the cat is out of the bag. They ultimately want to eat off of their plate, the MNO's plate. They want to take over that business. And so, for any MNO that is currently working with them, you know, made the the strategic error of enabling them. As I mentioned in my tweet before, this FT article is going to every single board member in every global MNO. You know, every board member is going to be reading this article, and they're going to try to. Figure out what they're going to do next, right? Because Starlink is now a competitive threat, and that that is where the puck is going. And so how do you respond to that? And so you will see you know SpaceX investors or just general investors say, well hey, now that Starlink's going to go attack this market, it's a big negative for AST Space Mobile and and for the MNOs and for all these tech companies. Most of that statement is true. It's bad for AT&T, it's bad for Verizon, it's bad for T-Mobile, it's bad for Google, it's bad for Amazon, bad for Apple. I mean, everybody, it's bad. But the exception is that it's really good for AST. And so why is that? Well, AST is the only competitor to Starlink that's offering a— well, by the way, differentiated service that actually offers true broadband to to an unmodified phone. Starlink, as we've talked about all these years, currently provides a narrowband texting service. Eventually they'll get to broadband. However, it will be limited in terms of its propagation and coverage because it's mid-band spectrum, whereas AST will be using low-band spectrum and then eventually mid-band as well. But yeah, in terms of how this impacts landscape, AST becomes a much more important and critical counter Counter asset for all these incumbents, right? Because now you've got T-Mobile joining the joint venture. I mean, it's all like lining up, right? Like T-Mobile realized this somehow over the last few months and they're like, hey, this Starlink partnership may not be a good thing for us. It's like the dog that's sitting in the room that's burning and has a coffee and it's like, this is fine. No, that's not fine. You need to move. You need to do something about it. And so that's why T-Mobile is joining AT&T and Verizon in the joint venture and will be using AST SpaceMobile because what's the point of enabling, you know, the Trojan horse analogy? Why bring in the Trojan horse to take all your customers? It makes absolutely zero sense. And so with this dynamic, as Starlink pursues the terrestrial mobile business, we become increasingly, we meaning AST, become increasingly important to all the MNOs globally. But we also become that much more strategic to the competitors of the integrated SpaceX-Tesla stack, right? And so if you're doing robotics, if you're doing autonomous drones, if you're doing any number of things, IoT devices, anything that requires connectivity or AI edge cases, you need to work with us because if you're working with SpaceX, you're enabling them to ultimately hollow you out. That's just the way the world works, right? And so not only are MNOs going to view AST as an important strategic complement, but that also includes the current strategic investor, Google. We know Meta has visited Midland and is working in Spain as well. They're testing apps with AST like WhatsApp and a few other things. And then, you know, these other players, Microsoft, Amazon. Yes, Amazon bought Globalstar. I've talked about that before. They bought it for spectrum. Who knows if they can stand up a real service, but let's put those people aside. Like, let's talk about military. We know Anduril has had a really tough time working with SpaceX and Starlink in particular. And obviously Anduril needs connectivity for all of its military assets, especially the ones that, you know, the autonomous vehicles that are the Drones, they they need connectivity there, and apparently they've had you know issues with with Starlink. Well, guess what? Like Palmer Lucky and actually a few other people who work at Andoril, which was also confirmed by Cook because he went camping and and talked with a few Andoril people. They all own ASD Space Mobile stock, and that's probably not by accident, right? If you're evaluating technology, oftentimes. And this is like some of the advantage that retail investors have who are in particular industries. You get to see stuff first and you get to see where technology is going. And as a result, you end up buying companies that you believe are going to benefit from that trend. And so the proliferation of drones and connectivity and Anduril in particular, I think it's very telling that the CEO and founder of the company, as well as many employees, own AST SpaceMobile. They're probably working together and they probably see where things are going. So putting aside the MNOs, putting aside the large tech companies, defense, Anduril, Shield AI, all these companies, they're all going to need connectivity, right? Even on this call that I had with Ben Devron talking about Bridger Aerospace, he pointed out during fires, firefighters cannot they lose their mobility, their connectivity because the canopy is too dense. And that's because Starlink, the fixed wireless service, can't penetrate trees or foliage, whereas AST SpaceMobile service using low-band cellular spectrum can do that, right? And so this is going to be an absolute game changer for those types of applications. But going back to this article, This shouldn't be a surprise to anybody. We've been talking about this for years and years and years. Starlink is focused on fixed wireless. They moved into direct-to-cell connectivity and they announced a product in 2022. It didn't get rolled out until 2025-ish in terms of commercial service. And of course that was a minimally viable product. You know, for people invested in AST SpaceMobile, we knew where the puck was going, which is mobile broadband market is way larger and much more attractive than fixed wireless business, right? And so in the end, ultimately, it just makes sense for Starlink to pivot and go into mobile wireless, right? And so SpaceMobile understood this, of course, from a competitive standpoint. That was the reason why AT&T and Verizon joined with AST SpaceMobile. And then T-Mobile, I guess, you know, because they wanted to be associated with SpaceX and Starlink, you know, Mike Sievert, who, by the way, was, you know, he's not at the company anymore. There's, we can all speculate as to why he was let go, but, or maybe left on his own, but it doesn't seem like it seems like he was pushed out. They're learning the hard way, right? So back in August of 2022, they announced the partnership to enable Starlink Direct-to-Cell, and now they're backing away from that, right? The exclusivity ends this, or actually, yeah, this or next month, and they're joining this joint venture, which ultimately is going to enable them to bring on AST SpaceMobile as a service. And so how will this work? Starlink, as we all know, operates a completely separate network. It does not integrate into The wireless, the MNO partners' core network, and it was never meant to, right? Because the long-term aim was to compete with them, right? And so this is a separate standalone network. And the way that this could work in the future is that Starlink will go directly to consumers and say, hey, if you want to use Starlink service, you can buy your service from us directly. Maybe, I don't know what they'll charge, you know, $30, $40, $50 a month. And you'll, you'll, your phone, you'll be able to purchase the phone from them, or you'll, you know, you'll use your current phone and you'll enable the Starlink eSIM as your first carrier of choice, right? It'll be on your phone. And then you will certainly need a backup network. And so you might buy some cheap service from, uh, I don't know, one of these MVNOs, or perhaps AT&T or Verizon or T-Mobile, and have it as your backup service in the order of, of this, you know, The— in your phone, it will order Starlink first, and then let's just say AT&T as a backup. And so you'll be able to use the Starlink service when you're out and about. However, if you go into buildings, if you go into, you know, a car, or if you're under a tunnel, that service will go out. And so you'll need the fallback to your AT&T service, right? And that, by the way, is not a seamless connection. So if you're doing something, if you're on the phone, If you're talking, you will get cut off and then your phone will search for a network and it will find the AT&T or Verizon or T-Mobile network that you subscribe to. So you're going to be paying, you know, 2 bills essentially, unless of course one of these guys decides to enable Starlink and they allow them to lease space on the network, which that is not, at least in the cards currently, because AT&T, Verizon, and T-Mobile very specifically has said we, we are not interested at all in becoming— allowing Starlink to become a mobile, a virtual mobile network operator. And so, um, so yeah, that service is going to be imperfect. It's not going to be great. It's not going to be seamless. Um, you're going to be able to, you know, if you're a Starlink or SpaceX fan, uh, you can say, oh, I got the service, but the service in and of itself is going to be quite patchy. Like, um, if you have a direct line of sight, to the sky, it'll work and it'll be pretty good because they've bought enough spectrum. But then once you get under trees or you go into a house, that's where you're gonna have big problems, which might be okay for some users, which by the way, like if you have Wi-Fi in your house, you're okay, you're gonna be covered. But it's gonna be in those cases where and when you actually need service, if you are going into somebody else's house or going again, in areas where there are buildings that might block your line of sight, um, to the sky, then, then your service is going to be somewhat patchy. So you will probably need a backup service, so you're going to pay kind of double for that. However, um, over time, what these guys have talked about, Starlink, is that they do— and this is new because this wasn't really disclosed in the IPO prospectus, but apparently in this debt prospectus they talked about the fact that they do want to launch a terrestrial network. And so they're going to build their own. I guess there are a few important points there. Building a terrestrial network is super expensive because you have to put up towers or you go to like an American Tower or one of these guys and say, hey, I want to lease space on your tower. And then you have to hang up radios and you have to light up spectrum, which by the way, like you need spectrum to light up. And so on the one hand, in very dense areas, they will put up a ton of radio towers and they'll leverage the mid-band spectrum that they have. But if they truly want to compete with terrestrial carriers, they're going to need to buy some low-band spectrum. And so that's, they're, by the way, they're like, that's a very finite resource. There's not much of it around, but there are pockets of it. So Grain Management is one company that is going through FCC approval process. They're trying to sell, I think, 800 MHz spectrum. And so if you see So there's some speculation that maybe AST and its partners might get their hands on that, but I don't think that's necessarily a foregone conclusion. There is a good chance that SpaceX buys that spectrum, and if they do, that day you should buy as much AST SpaceMobile stock as you can because that will be an unequivocal shot across the bow against T-Mobile, AT&T, Verizon, where it's like, Okay, you have crossed the Rubicon. None of us are going to work with you because you are directly competing with us. And so that is a possibility. SpaceX could go and buy that spectrum. Now, is it going to be enough to have a good service?
[00:15:04] Speaker C: No.
[00:15:05] Speaker D: But is it going to be good enough to have a service? Yeah, it would be. And they're going to have to spend billions of dollars to go deploy that spectrum across the country, but they just went public. And so they have a lot of money. They can actually Spend the money and go do it. Now, it's not easy. And Dish Networks, which is now EchoStar, which is now, I guess it trades as ECHO. Charlie Ergen, back in the day, he bought a bunch of AWS-3 spectrum, which ultimately ended up in Starlink's hands, but he bought a bunch of spectrum and his dream was to build a 4th wireless carrier, or back then was a 5th wireless carrier in the US. However, after spending billions of dollars and not hitting his milestones for service, he was forced to sell that spectrum, which ultimately ended up with Starlink. But yeah, building a terrestrial service is not easy, but I wouldn't put it past SpaceX and Elon Musk to do it because the amount of economics up for grabs, the TAM, is absolutely massive. Right. And so they have the moolah and they have the gumption to go do it. And so you might say, well, isn't that bad for AST? No, it's really good. Like when you have the 3 largest carriers in the most profitable market, they have to work with you and you become perhaps the most strategically important asset in differentiating and going toe to toe with Starlink. your value goes up. Like, that's, this is like, how can I describe it? It's like before, back in the day when AST was working with AT&T and we're like, oh yeah, we're gonna, we're gonna like go change, go launch a service that changed the world. And then, and then of course like Starlink came around and was like, hey, we're gonna get into that business too. And, and back then, going to my old self back in 2022, it's like, oh shit, these guys are getting into the business too. And now you've gotta like fight. Fight for airspace. And this is, you know, from a competitive perspective, people will just think that it's a Starlink winner-take-all market. But then, but then of course, as things evolved, it's like, no, wait, we got Verizon. Verizon understands the game and that Starlink's here to eat their lunch. And so we got Verizon and the stock went from, you know, it's $5, $6 to $39, right? And then, and then now of course we're in this like malaise, but The market doesn't realize like we got T-Mobile and it's like, okay, we got 3 of the top wireless carriers in the US. I mean, Starlink is not a carrier yet. I mean, that's many years away, but what good fortune. Like I would've never imagined in any alternative universe that we would get all 3 carriers. Like that was just never a contemplation that I could even Fathom, right? But now we do, which is insane. But the market doesn't realize that, which is funny. And then most market participants are like, well, SpaceX is getting this business, so it's got to be bad for everybody. No, it's yes, it's bad for people who are impacted by it, but for us, it's good. It's like an accelerant. It's like it puts us into the pole position. Like we are the North Star for all these players. It's not just AT&T, not Verizon, not just T-Mobile. It's all them, but it's also Google. It's like Apple. I mean, everybody. Like our strategic value has gone up exponentially. And I can't emphasize that enough because we are the strategic counter to what Starlink is doing. And we are the only global player. It's not just, you know, with these guys here domestically. And we're talking about like Vodafone, Orange, Telefonica, Telenova, CK Hutchinson in Europe, Saudi Telecom, and, you MTN, I mean, all the Middle East and African carriers in Asia. You know, we got Rakuten, Globe, an unnamed Korean carrier, which I'm sure we'll learn about that at some point. In India, we have Vodafone Idea. I mean, we've got 60 of these guys globally, right? And that number is going to go up because of what is being explicitly said now is that Starlink is coming to eat your lunch.
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[00:19:42] Speaker D: So that's like, you know, that is really powerful because it's putting these carriers, by the way, they're very slow to move, but they've got to move quickly because Starlink is here and they're going to— now we talk about the competitive dynamics where Starlink, the current service sucks, right? And it's going to take Starship to get to operational cadence and then For them to deploy the next generation satellites, the V2 satellites, and those are going, they're targeting around 150 megabits per second within the cell, whereas we're already getting to 200 megabits per second. And so, and you know, it's not like AST is sitting on their hands. They've already developed the second, third, fourth generation, or there's a roadmap for it, right? I mean, Verizon talked about this when they decided to work with AST back in 2024 about how—
[00:20:34] Speaker A: Yeah.
[00:20:34] Speaker D: they chose AST because the roadmap was, part of the decision was that the roadmap was more attractive. And of course, for Verizon, they knew strategically that Starlink was a big problem. But yeah, I mean, we are, as Katzi would say, we are not here to compete with the MNOs. We're here to partner with them. And you can see it in the economics, right? Like, so for T-Mobile and their current deal with Starlink, they get A pittance. They get 20 cents of every dollar generated and Starlink keeps 80 cents. Whereas in our partnerships with AT&T and Verizon, we keep 50 cents and they keep 50 cents, which is in terms of incentives, that's the way you want to structure a true partnership, right? And that of course exists because T-Mobile, you know, was— T-Mobile was kind of left out of working with AST back then and they had no choice. So they decided to work with with Starlink. And as a result, Starlink, since they own the infrastructure, they own the satellites, they own the gateways, and there's no integration into the operator's core network, then they're going to dictate the economics of it. And I talked about this yesterday. This is really important because when it comes to these other regions where they're going to be a bit more leery about working with for example, SpaceX, or having too much exposure to the US government, then you run into sovereignty issues, right? And Starlink will never give that up. They will not enter into a JV. They will not let you own some Starlink satellites. They will not let you have a command and control center in your country. They will control the traffic and they will dictate to you when they receive the data. They're going to spend it around any which way they want and then give it to you. And then it's Take it or leave it. That's just how it works. Whereas with AST, you do have these joint ventures that are forming, whether that's Satellite Connect in Europe or the JLEO project, this joint venture that was started by Rakuten and AST in Japan, which here you have these structures where they will buy the satellites and they will own the ground infrastructure and the command and control and have the ability to, you know, the kill switch. But, and then of course, when those satellites are over a specific region, those countries and the local MNOs will control them, right? And then of course, when they're not out of that region, or when they are out of that region and useful in, let's say these Japanese satellites are useful over the US or Europe, then you will have this leasing agreement where AST will utilize those satellites and then pay the JV some amount of economics for that use. And so the model is beautiful, right? Because you're actually getting buy-in from local regulators, which is super important. I'll talk about it in a bit. Local governments and also for military use cases, right? So the US military is not the only one in the world. The Japanese military, as we, there was a post earlier today talking about how these communication satellites, which we all know it's not just about comms, it's about radar sensing, electronic warfare, position navigation timing. Everybody will want their own dedicated satellites, right? And so that will be really important. And so imagine when we talk about dual use cases, not just commercial, but it's also the military of Europe who will develop perhaps something similar to Golden Dome or some type of fabric that will, for example, I mean, just going to the first responder network, FirstNet here, During natural disasters, you're going to need a dedicated network that can light up spectrum, cellular spectrum, which is really important during periods of time when the terrestrial network is down. And so in Spain, I think it was what, a year or 2 years ago when there was massive floods and the entire infrastructure was wiped out during those periods of time, AST, if you had the satellites, you could have lit up spectrum and people would have access to Mobile service, first responders too. You could communicate, you know, find victims and do all these things, right? And so that's really important for Europe. That's super important for Japan, where unfortunately it's a beautiful country, but they're subject to a ton of natural disasters, whether it's earthquakes, tsunamis, I mean, you name it. And so that's really critical, right? And so I think going back to what I was saying before, for Starlink, Put, you know, taking the mask off and going after the terrestrial business. Like, I, I— now, yeah, the, the key players in each country, um, are going to be dissuaded because they know what they're doing now of working with Starlink. Now, could other comp— could other— we know that T-Mobile, Verizon, AT&T don't want to work with them, but in other countries, could other carriers enable Starlink? Yeah, absolutely. Like there could be, imagine a country where you have a distant 3rd or 4th player who is smaller than maybe the top 2 or 3 carriers. They might view it as attractive. They might say, well, hey, you know what? I'll work with Starlink. I will allow them to leverage our terrestrial network and turn them into an MVNO, a virtual network operator. And so I'll do that because net-net, I'm going to gain additional subscribers. Now, I'm not going to get the economics of it, but I'm going to be in a much better position than I was versus the larger players. And so you might see some of that, but the counter is that, yeah, that's going to happen, but then that's also going to increase the importance of those 2 or 3 larger carriers to work with AST SpaceMobile because they're like, oh my God, these guys are enabling Starlink. So I have to work with AST SpaceMobile like that. And this is like the game theory that's going to go on over and over and over in every country. And that's why today I'm like so excited because now there's actual Starlink people that are saying, yeah, we're coming to eat your, you know, eat off your plate, eat your lunch, which is a point that AST SpaceMobile shareholders have made for years, right? But then until, but it's all like speculation. It's not like there's something you can point to. And of course, like when Elon did the interview I guess it was like last fall where he was kind of egged on by the All-In Podcast members to answer the question whether or not he would enter into the mobile network operator business. He said, yeah, we could do that. And, but then he had to walk it back and he is like, well, but we want to work in partnership with the MNOs. But At least for us, like the cat was out of the bag, right? We've known this for a long time. And from a strategic perspective, any MNO working with Starlink, it truly was a Faustian bargain, right? Because for all these MNOs like T-Mobile, their 5G home business, their fiber business, like that's a pretty big driver of growth for these companies. And then that's why, like, for example, cable internet companies like Comcast and Charter, they've been completely getting smoked is because these wireless guys are taking share and so is Starlink. And so for a company like T-Mobile, the strategic weight of, okay, well, if we work with these guys, we'll maybe get some near-term market share and we'll get some marketing pizzazz, but then we're basically ceding future growth of our fixed wireless business, right? The 5G home business, which I guess people there They're just not long-term strategic thinkers. But that's why, you know, we had been saying for years, like Starlink direct-to-cell is incompatible with MNOs because the core business, which is the fixed wireless business, you know, the dish you put on top of your house, that is in direct competition with a key driver of growth and profitability for AT&T, for Verizon, for T-Mobile. And so I guess the Street is finally waking up to that. I did want to cover another topic, which was whether it was TD Cowen or some other Wall Street bank. I read part of the note, which was a bit harebrained. Part of it was true. It's like, well, we think SpaceX wants to get into the mobile wireless business. Well, yeah, yeah, they do because it's really attractive. And then they speculated that SpaceX could buy T-Mobile. And of course you've got any number of X accounts that tweeted it as a headline, like breaking news, speculation SpaceX could buy T-Mobile. Um, yeah, they could try, um, but it's not going to happen. And the reason why I would say that is, is a few things. So let's first talk about, um, regulatory, right? So, so Brendan Carr, he's, he's, he's obviously very favorably disposed of SpaceX and the entire, um, you know, Elon Musk universe, right? He's very supportive, which is good because Elon Musk is a pretty innovative guy and as long as there's a fair competitive playing field, then let the best man win. Right. And so he's very supportive of SpaceX and whether that was around direct-to-cell, he's also been supportive of AOC Space Mobile, which is great. And that's what you want. Right. But from a regulatory perspective, there were some sins in the past that will not be forgotten. And what I mean by that is back in the day when you had AT&T, Verizon, T-Mobile, and a company called Sprint. There were 4 wireless network operators in the US. Now, AT&T and Verizon were much bigger than T-Mobile and Sprint. T-Mobile and Sprint went to their regulators and said, hey man, for us to really compete and to spend money into the network, you need to allow us to merge. And once we merge, we promise we're going to lower prices, right? We're going to have like a great stack of spectrum. we're going to be able to compete more effectively and we're going to lower prices. And of course, like anybody who's taken Economics 101, when you have an oligopoly of 3 players, they're not going to lower prices. Like, that's a total pipe dream. People, they're going to invest to a degree, but they're going to get comfortable and they're going to raise prices. They're going to extract maximum profits. That's what oligopolies do. And so the DOJ, the Department of Justice, and the FTC back then, they got bamboozled. They're like, okay, yeah, we'll approve this on the condition that we want to create a maverick 4th player. And how did they do that? So during the approval process for T-Mobile and Sprint, they forced that company to divest assets of which there were towers, there was a brand, and there was some amount of low-band spectrum. And that package of assets was sold to a company called Dish Networks. which was owned, which is owned by Charlie Ergen. He also owns EchoStar. And Charlie Ergen, uh, he was able to convince regulators, hey, if I buy this, this, um, if I buy some of these wireless assets and I combine it with my AWS-3 spectrum, which I've been sitting on for years, I haven't done anything, I promise I will build a competitive facilities-based 4th player. When I say facilities-based, it means like you actually own the towers, you own spectrum, And you have the ability in terms of the economic structure to compete with the other players. And so the DOJ and the FCC, and I believe, by the way, this wasn't— was it under Republican or Democratic? Anyway, it doesn't matter which political party it was under. It was just a huge mistake, right? So they approved this deal. Dish, of course, for years and years, they bought the Boost Mobile brand from from T-Mobile and Sprint. They got some towers and they got some spectrum, 800 MHz spectrum, which of course, and that shows you Dish Networks had a huge amount of AWS-3 mid-band spectrum, but they had no low-band spectrum, which is what you need to compete. And so they were able to get some 800 MHz spectrum from the combined T-Mobile and Sprint. And so of course over the years they spent billions of dollars, they missed, build-out requirements, and then they just weren't of scale. They just couldn't compete. Like, who wants to, for me or for someone, who wants to buy very patchy service from Boost Mobile, right? And for Dish, they even lined up MVNO agreements with, I think it was AT&T and T-Mobile. But even then, it's just like, you know, people don't, for example, for your cable companies, those are MVNOs too. So I have a cable company, Spectrum. They offer like, I think it's $20 or $30 off if I get mobile service through them. Nobody wants to buy mobile service through their cable company because cable companies are notoriously awful for customer service. And so the last thing I want to do is if I have problems, I, even though it's the same network, they use Verizon or they use AT&T, I do not want to deal with those clowns. And so that's why I wouldn't use that service. And likewise for for Dish, for Boost Mobile, like no one uses the service. And so that thing failed. It absolutely flopped, right? They lost, I forgot, they had a few million subs when they started and they lost like a pretty decent amount of them. It got to the point where in the end, the FCC came back to, and this is Brendan Carr, the previous deal didn't happen under him. I think it was Ajit Pai. Brendan Carr came to Charlie Ergen and said, hey, all that spectrum you've been sitting on, it's use it or lose it. So you either lease it out or sell it. And then of course, Ergen decided to sell it to SpaceX. Now let's look at the competitive landscape. Now you've got a situation where you've got 3 large comfortable carriers, AT&T, Verizon, T-Mobile, and then you've got SpaceX coming in and saying, hey, with Starlink, we want to compete. And so we bought a bunch of spectrum. Thank you, FCC, for approving that. We appreciate that. And now we're going to go compete. And then maybe they'll be able to pick up some low-band spectrum from somewhere. But regardless, like, um, I remember when Gwynne Shotwell was like, oh hey, we're the David and they're the Goliath. No, you guys are the Goliath. You have a $2 trillion market cap and you have a company with, um, all these, these areas of technology. You should be able to compete on your own. But anyway, um, the reason why I bring this up is that when the— if the DOJ and the FCC, they see SpaceX Starlink and they're like, oh yeah, they're going to create a credible 4th player, then great. We're going to like give them regulatory approvals and do whatever we can to support them. Great. US is going to be the wireless market. It's going to be competitive again. Um, and then enter in TD Cowen speculation, you know, harebrained speculation. Uh, what if, uh, what if SpaceX buys T-Mobile? Um, yeah, that thing's going to be dead on arrival. Like there's no way that the DOJ and FCC approve that deal. Why? Because you're basically going back to The FCC just approved AWS-3 spectrum EchoStar sale to Starlink, and Starlink said, hey, we promise to compete with the incumbents. And then they're going to go buy T-Mobile. And so the market's going to go from what could be 4 players back to 3. No, it's absolutely going to get blocked. It's like the antithesis of what they're trying to enable. And you can basically copy and paste this around the world. Right? Like, for foreign countries, especially, let's just take Europe. If SpaceX wants to buy, I don't know, Deutsche Telekom, would that be allowed? I would say most certainly not, right? Similar to how there's some level of, I mean, if you think the US is protectionist, think about Europe. Like, oh, this US company that wants to dominate globally, they're going to be allowed to buy a European champion? That's NFW. not going to happen. They can try. They can try. And there's going to be— you're always going to find DC M&A lawyers who do regulatory work that will tell you, yeah, there's a way you can do this if you do X, Y, and Z, and we'll get it through the regulatory traps because they're paid to do that, right? You're going to pay us a ton of fees to try to get a deal approved, and then it's going to get blocked at the end. So from a regulatory standpoint, I don't think the— whether it's in the Republican or Democratic administration, I don't think the DOJ or FCC would approve that deal. What they will approve is if SpaceX tries to buy some low-band spectrum, which again, there's not much out there, but there's a small amount, they would approve that, right? Because they want to foster competition. And that in turn, with SpaceX doing those types of things, that increases the strategic importance of AST. And any notion, by the way, of like pricing perhaps going down for AST as these strategic partners, this is like incremental business for them, right? Like being able to deploy Phalo spectrum that's in a dead spot. And then of course AST has mid-band spectrum that they can augment the network. You're not going to shave off, you know, a 50/50 split. You're not going to shave off points on that in order to save some money here when your most important partner is the only thing to counter SpaceX and Starlink. And this is an area, this is like a growth business. Like you wouldn't cut your legs out to do that. It doesn't make any sense. And of course AST needs money and capital to deploy the network, deploy constellation. They're going to deploy like 2, 3, 4, 5 shells and it's going to be whiz-bang great. And we learned this morning, by the way, that I think it was the Brazilian regulators were saying that, and it kind of hints at the technology. I think for a particular user, you could connect up to 4 AST satellites. And so That was a nice nugget, just demonstrating, you know, MIMO capabilities. But yeah, you're going to want a service that's delivering ultimately what AST is doing if they leverage mid-band and C-band spectrum, like gigabit type of speeds, right? And that's going to be good because AST, by the way, is like that service is sold through the MNOs. It's not in competition with them. So going back to what I was saying before, this speculation doesn't make sense from a regulatory standpoint. So let's talk about Deutsche Telekom. Deutsche Telekom, maybe it was like 10 years ago, they, or maybe even longer, they were on this trajectory of selling down their stake in T-Mobile because they're like, ah, maybe it's not core. And so we're going to sell it down. And then of course, I guess it was within recent years when they realized, I mean, everybody knows this, but the economics in Europe suck, right? Like regulators are really tough in Europe. And so Deutsche Telekom was like, hey, you know what? Actually, we should hold onto T-Mobile because the US market's more attractive. if we sell that down, then what are we left with? Right? And so they actually started buying back shares in T-Mobile. So I don't think they're going to sell, even if you could get it through regulators. I don't think they would be willing to sell their crown jewel, which is T-Mobile. If they, I guess if SpaceX wanted to buy Deutsche Telekom and buy both entities, then perhaps they could do that. But I went, you know, going back to European regulators, that would be dead on arrival. It's not not going to happen. European champion, uh, US company trying to come in with like a maverick CEO who, you know, is politically, let's just say, not the most popular person. That's not gonna happen. Um, and so let's— and then so those are 2 things. And then let's talk about the 3rd aspect, which is SpaceX pro forma valuation. And so this is important because if you were to buy T-Mobile Let's just look at Street projections. Let's see, 2020. Let's just look at 2026, right? So T-Mobile's going to do $95 billion of revenue, gross margins 63%. So very attractive. EBITDA $37 billion, right? But then you've got pretty significant CapEx every year. I think it's like $10, $11 billion. But this space company called SpaceX, which by the way is, and I've talked about this before, is now 60% a neo-cloud leasing company. So what previously SpaceX was launch and connectivity, connectivity was like, I don't know, 69% of revenue. And the rest of this stuff is including xAI as the balance, but then a majority of the profitability is connectivity. Now with SpaceX entering into these neo-cloud leasing agreements with Google, Anthropic, and I think it's Relative AI, Now, 60, 70% of the revenues, and I'm not sure where the profitability of those contracts are, but now it's a neo-cloud leasing company, right? And so my guess is that over time you might see SpaceX, the valuation, because, you know, the, maybe perhaps those areas aren't exciting. However, they are compatible with what SpaceX is doing, which is ultimately putting compute out into space, right? And so, and, you know, I've talked about the dynamic there of, you know, why do they lease the infrastructure? Maybe xAI doesn't need it. Maybe it hasn't had the adoption they expect. They also bought Cursor. So they're trying to get into maybe tools and higher value things. But so imagine that world, right? Where then all of a sudden you buy a US wireless carrier, which on the one hand, the margins and cash flow are really attractive. On the other hand, your growth for a majority of your revenues, and so let's say T-Mobile represents, I don't know, let me see, a vast majority of your revenues. So let's say just like 2/3 or 3/4 of your revenue is now T-Mobile, which is growing at 2, 3, 4, 5% a year, then your valuation is going to derate, right? Because people are going to do some of the parts and say, okay, well, I'm going to ascribe, you know, maybe T-Mobile will go from trading at 7.5 times next year EBITDA to, because it's under the SpaceX brand and they're able to grow, right? There's some revenue synergies. Maybe I'll ascribe a 9 or 10 times EBITDA multiple. Well, that's all fine and nice, which is great, right? Because it's a very, it would be a highly accretive deal because you're paying in highly valued stock and maybe some cash. But SpaceX is trading for 2026, is trading at 160 times EBITDA, right? So there's the cognitive dissonance. Like a vast majority of your revenues are now going to be in the wireless business, and that trades at 8 times, and then you yourself are trading 160 times. So the answer is somewhere in the middle for the pro forma company. And so one of the quickest ways to destroy value is to buy To pivot into something that is somewhat related, but is slow growing. And then, you know, ideally, if I was at SpaceX, and this is what they're doing, by the way, you wouldn't go out and buy an incumbent because it's going to— there's a whole host of complexities, you know, there's a lot of people to integrate. Your valuations can come down and all these things, right? The better way is to actually go compete and try to take share. Because then you can do that and people will afford you a high valuation multiple because they're like, oh my God, look at all this TAM. Like, let's go after that. And so that would be higher execution risk, but well, actually, I guess I would argue both have high execution risk, but that would be the way to do it if you want to preserve your valuation. And people will probably give you even a higher valuation because they're like, oh, I'm going to go chip away at all that revenue from the 3 carriers and profitability. Right. And so that would be buying T-Mobile the day that happens. SpaceX would absolutely crater. It's just like, now if you were at SpaceX and you didn't believe in your own valuation, then you might go do that deal, right? Because you're like, I'm going to take this high-value currency and go buy something more mature, but trading at a lower valuation. And then I'll tell the street like, it's highly accretive. There's like a ton of revenue synergies. I'm going to take share from AT&T and Verizon. So that might be how you pitch it. but in reality, um, that's going to heavily de-rate SpaceX's stock, which is something I don't think Elon wants to do. Um, and then going, you know, talking about the repercussions of that, uh, if you were to buy T-Mobile, again, this goes back to the point where ASC becomes that much more critical and important to every player globally. And so in any market, the top MNOs are like, shit, these guys are really coming. They might go try to buy assets elsewhere. We really, you know, if I wasn't returning the call to Scott, which by the way, like if you talk to the company, they'll say that they're talking with everybody. And after the SpaceX IPO and all these different revelations, the conversations have like ticked up massively. But you would be calling AST and saying, how do we work together? This is a problem, right? And so that's why this is all really I can't say it enough, like, this is really game-changing stuff for the company. And yes, the stock price is down, space is down, everybody feels like shit, but I don't because I'm super excited. I bought some more and I see the path ahead. And this volatility is just a feature. It's not a bug. Like, this stuff happens. Market doesn't understand things. Everything's trading together. Good news doesn't matter. Stock price goes down, but Once the market settles and people start realizing what all this means, you're going to have the example is you're going to have this type of reaction where when the stock, when the market saw Verizon worked with AST and they realized that AT&T's working with AST and what it meant, stock price went from 5 to 9 and then it like dribbled up to 10, 11, 12, 13. And then it was just a unidirectional re-rate to 39, because then people realized what it meant. It's like, oh my God, this is real. They've got the 2 largest carriers and it's not some science project. Like this thing is really going commercial. And you can go back and look at the most recent months, like where our constellation, it's small still, but it's up 100%, over 100% in terms of actual compute capacity and data delivery, right? And that's increasing with each one of these launches. And so as that happens, the price and the value is going to be unlocked, right? And the volatility that we experience of the unknown unknowns, like the uncertainty, that's going to go away and you're just going to have this like steady step function up. And that's what I think this news, like once the real, the research analysts who use like most of their brain are able to comprehend what this means, That's what you're going to experience, right? And so going back to the, you know, these MNOs globally, as I mentioned, there could be some that will work with Starlink and enable them as MVNO, but that will make AST that much more important for the MNOs that do not work with Starlink. And also, as I mentioned before, foreign regulators, and this is really important, foreign regulators will become that much more sensitive to what Starlink is doing in their home market.
[00:47:29] Speaker B: Right?
[00:47:29] Speaker D: So if you have Starlink, by the way, so let's, let's take, I don't know, just some country. Um, let's, let's say in Europe, um, Starlink then starts trying to provide mobile service and they want to work with the incumbent MVNO or an MNO to become a virtual network operator. The regulators come in and say, hey, we're not interested in Starlink coming into this business. Um, we're, we're going to block it. Right. And so they want to protect their national champions. They want to protect sovereignty, which is really important. It's kind of funny because like we here in the US talk about sovereignty, but then Sprint was primarily owned and controlled by SoftBank, which is a Japanese entity, which is an ally. So no problem. And then Deutsche Telekom owns T-Mobile and they also own, by association, they own all the spectrum in the US, which is a German company, which again, they're an ally. So no problem. I bring this point up because like the, you wouldn't expect the same welcoming hand from regulators internationally, right? Like we, it's not as if like a US company can go in and buy a German wireless operator. That's not going to happen. And so that dynamic is going to exist and it's going to be hard for Starlink to overcome. And then on top of that, because they've played their hand, this is a truly important point. And I'm going to end this conversation here with it. When Starlink goes out to regulators globally and asks for a use of S-band spectrum, which they brought the rights from EchoStar, but they have to go to each local regulator and get permission to use it, the regulators are going to say, okay, so you are going to offer service in my country and you're going to compete with the homegrown, the home side wireless carriers, and you're going to take subscribers from them. your profits are going to go back to the US? No, I don't think so. I'm not going to approve your S-band spectrum. And, and that's, that's going to be the conversation. Like, that's full stop. Like, this whole idea of getting, uh, buying the EchoStar and then having globalized, global harmonized spectrum, um, that sounds all nice, but you have to go market by market and get approval for that use. And so, but as I mentioned before, the way that SpaceX is structured and Starlink is structured, they're not, They're not asking for partnerships in each country. They want to own the entire thing. And if you're telling regulators that, okay, we're not just doing fixed wireless service, we're coming in to provide mobile service and we're going to put competitive pressure on your incumbents who employ a ton of people in your country. And it's an important industry, regulators are going to say, there's the door. You can, don't let the door hit your ass on the way out. They're not going to approve it, right? And so this is why AST SpaceMobile's approach is absolutely critical in that you work with MNOs in partnership, not in an adversarial role, but in true partnership. You form a joint venture if need be, or you just operate directly with the mobile network operator. And the split, because we provide a constellation, but you provide the customers and all the sales and marketing and support, um, we're going to split that 50/50, right? And so your, your citizens in that country are going to benefit from full broadband connectivity, no matter where they go, disasters, emergencies, everything. And you're going to get economics from it and your people are going to benefit. And, and we're going to get 50% because we need to keep CapEx going, building out the constellation, making it better, bigger, all that stuff, right? But Starlink, when they come in and they say, hey, we want approval for this S-band spectrum, And we're going to compete with your mobile network operators. The regulators are going to say, no, this is enough. We're not interested. Right? And of course, the FCC here in the US will say, well, if you guys don't give us reciprocity, then we're not going to approve your foreign wireless services for the US. And a lot of these countries are going to say, that's fine. I don't— none of our companies are offering service in the US, nor do they have any desire to.
[00:51:39] Speaker B: Right.
[00:51:39] Speaker D: And so that kind of falls on deaf ears, right? And so I think this is probably the most underappreciated aspect of this, which is by Starlink entering into the mobile network operating business, wireless carrier business, and making that known and then going globally with it, every regulator around the world are going to be super sensitive to protecting their interests, their sovereignty. And as a result, they are not going to grant Starlink these licenses for S-band. If anything, it makes it almost toxic. And as a result, ASD through local partners where it is locally owned and operated, that's going to be a much more attractive solution, right? And this is like, some people talk about like NBA Space having the Aurora satellites and Yeah, that's going to be really competitive. We don't know that those satellites haven't been launched. They haven't been tested. We don't know what their capabilities are. Maybe they could do broadband, maybe not. I don't know, but they're not working with local partners and we'll see. I mean, and by the way, like more choice is good, more competitors, great. Like that's what you want, right? You want a vibrant industry. But I think, as I've said, like the underappreciated aspect of this is by virtue of, I guess, greed, by Starlink kind of showing their cards, they're making it almost impossible to go global with this service because they are— everybody's walls are going to be up, right? They're going to understand what this means competitively, what it means for their country, for sovereignty. And yeah, that is a strategic blunder. It's like Napoleon Bonaparte, like, don't bother your enemies when they're making a strategic mistake. And this is what we're seeing unfold now. So anyway, I've got to run because I have a kid to go pick up from a summer camp, but I hope this discussion was useful. This is probably one of the most important podcasts I've done. I think everybody should just really You know, who cares about the stock price? Because the stock price will take care of itself. Just really drill down and think about what this means for the wireless industry. What does it do to the strategic importance of AST? And it's not just MNOs, we're talking about tech companies as well. And then how do foreign MNOs, you know, domestic MNOs, but foreign MNOs and then regulators, how do they respond? Like, what does that mean? If Starlink is coming to disrupt terrestrial, the terrestrial market, and it's for the benefit of this company called SpaceX that's based here in the US, which I have tremendous amount of respect for, and obviously where we use our launches, but in particular for this part of the business, what does that do? Does this opening up of their competitive playbook, does it ease their regulatory process and path, or does it actually harm it? And does it, does it put up more roadblocks? That, that once the market realizes that, that's when the true rerating happens. So anyway, thanks everyone for joining. I'll end it there. Maybe we'll do another space at some point, but, um, take care everyone.
[00:55:00] Speaker C: 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.
[00:55:33] Speaker A: Listen.
[00:55:40] Speaker D: Mmm, waffles.