Deutsche Bank's Global Space Summit in New York, President Scott Wisniewski

[00:00:01] Speaker A: Deep Space Ball was entirely focused on the direct-to-device opportunity. We were founded about 8 years ago with some initial purpose to solve some of the problems that exist with the 3GPP protocol. And we have since launched 5 satellites. They're the largest satellites ever launched commercially in the low Earth orbit, and we're getting ready to launch about 3 times the size next month. We've over this eight-year journey raised about five billion dollars in support of this network build out. Think of us as a Lego constellation that's entirely focused on cellular, and we've done that because first from a technology point of view, and then second with partnered operators. So we've built relationships and agreements with over fifty mobile network operators globally who have nearly two billion subscribers. We're entirely focused on just six billion old phones that are in circulation today. I can go over there. Going in and out of public today on a daily basis, so as you live, work, and travel. How can we do this with really different engineering architecture at Corbin that we're clearing or building down? And we do it as part of the ecosystem because the ecosystem is very important in this. It's not an ecosystem that we own entirely. It's an ecosystem that we participate in. And the mobile network operators are a very, very important piece, and they are the ones that we pay. our servers ready to go on our phones and the 1 trillion attempts. So we were founded around this opportunity. As it's grown in the interest of years, we think the right strategy, which is a broadband-first strategy, we're delivering large arrays that can do broadband as you post. And that's, that's Ripple. It's a big market and we've organized our business around them. So we talked about market size expectations. We think they're going to be big. How big? But We're entirely organized as a company around the outcome on that. And we're making radio electric constellations that then we're deploying in the world focused. Android 8 generation, Grand Prix 2025, this is our next step. I think Paul mentioned a good point, which is that it's about making phones work better. We got pretty good, incredible terrestrial connectivity at Kindle where we started 30 years ago from zero. So the notion that we have tremendous terrestrial connectivity. It's fantastic. We've been in the right direction for civilization. But our phones don't work perfectly now. We do not have 100% geographic connectivity. Where our phones don't work, we're going to have to add it. And we know that all of us, including every successive younger generation, is willing to pay for connectivity over most other household items. So I think the demand drivers for connectivity are incredible. The access to 6 billion phones, which are now standardized post-3G, is incredible. And, you know, our strategy is to do a native cellular service on top of what's already picked up. It's not a tacked-on texting thing. So we think that the market is big. I think Morgan Research has it at tens of billions of dollars. It's, you know, starting now. So we don't know, right? I'm not smart enough to know how big it'll be. But our company is entirely organized around providing value to the end customer and value to our customer, the MNO. And how big that gets, we're leveraged to that upside. But I think we see a good runway to tens of billions of dollars in the end state of revenue being created. And that's value that makes the phone work. And there's just several customers. There's one, it's the customers, even though it doesn't really have good connectivity, who will pay for that gigabyte. There's a customer like many of us who probably have good ability to pay, that will pay for that convenience factor. And then there's the buyer who just from a pure brand archetype perspective doesn't think their phone works very well. Because we have evolving imperfect networks and the handoffs aren't great. And so we think selling additional connectivity when you don't otherwise have it with your phone staying in your pocket is very valuable and that there's a significant customer there and the network is tens of billions of dollars. The more spectrum is better than less spectrum? Our claim to fame amongst several in building this industry up is that we have a really large salad. And the benefits of a real large satellite is a lot of power in orbit and the ability to put a lot of service down on the ground and the ability to manage cellular interference standards with that large satellite. And so that's where we started from. And in doing that, as a byproduct of our carrier relationships, we had to use their spectrums and have to make our own. And so the spectrums in the phones between our low-band and mid-band satellites, they're tunable to over 1,000 megahertz of spectrum. of cellular spectrum that's in phones today and we use it in places that they don't use it through the miracle of carrier aggregation and other 3GPP standards that we've added onto compatible base phones. We can recombine spectrum. That's how AT&T and Verizon came together as part of our solution in the 850 MHz band is that we took stranded spectrum that was legacy 2G, 3G and put it back together. And it's becoming useful. US. And so that's what a large satellite in orbit with a lot of power and our technology can do. And alongside that, we were fortunate enough to sign up earlier this year long-term 8-year access rights to O-band in the US. And we've also made other MSS spectrum moves globally. But we think that both strategies are great. Both have pluses and minuses, but having access to as much spectrum as possible, being able to partner with carriers and bring more stuff to carry your relationship is very valuable strategically and is going to be a part of this evolution. And I, I think we're decades away from a notion where we're pushed down to marginal economics. This is a land grab, a big buildout, however you cut it. And the more assets you have to the party— technology, relationships, spectrum, capital— the better off you are. Kind of that's where we're focused. On time. And the model we've always driven is analog. a 50-50 gross share for add-on revenue. And of the 4 definitive agreements we've signed with AT&T, Verizon, Vodafone, and STC of Saudi Arabia, with the cumulative $1 billion of take-or-pay revenue across those contracts. So we think that an add-on business model is a smart way to go for a broadband product. And we think that the value is there for the customer to pay some percentage of your customer a base pay. And over time, some of that may be included in premium plans. There's lots of models. There's layout or offloading, there's edge offloading, there's disaster recovery, there's backup options, there's standalone options. There's a lot of different models. But at the moment where we're starting the contractual and commercial journey, it's with an add-on product, which you see across the ocean of decades of the wireless industry, including with today's international passport model when you're away abroad. So that's, I think, a smart way to start to build this product out, aligns interests across revenue generation, churn reduction through customer satisfaction, and framework of franchises. So I think that's a smart way to do it, a smart way to align interests, and it's how we've always attacked the problem. We're hoping to operate in a world that has 6 billion phones in it. So the ecosystem approach is totally different than you might see in fixed broadband business. And from the outset, our approach is very mobile network operator-centric, but we have investments from American Tower, big tower company in the world, invested twice. We have investment from Google, who has the largest operating system with 3 billion Android users in the history of mankind. And, but on top of the mobile network operator rooms, that's really where we've made our bet because we think that's where the services hand is, that's where the users are, that's where folks will value rich media, broadband, video, the stuff that we do on our phone more and more every day. And That means Vodafone has invested 3 times, that we have a 5-year mutually exclusive contract in all 24 of their markets globally, including a joint venture in Europe. AT&T, with whom we have a mutually exclusive contract in the United States. Bell Canada, with whom we have a mutually exclusive contract in Canada. And STC, we just signed up with a mutually exclusive contract in some locations over as many as 10 years. So for us, we've made our way with all the network operators. They've been in the room with us for years and years and years developing this product. And their CLOs, their C-suite is aligned with us. And for those who have said, well, these investments are small, they're not meaningful, we just announced last week on our earnings call for the first time cumulative take-or-pay agreements of over $1 billion in future router commitments, in addition to prepayments, including $175 million coming in this month from STC. So we think mobile network operators are our partner of choice, but we love the ecosystem. We want to grow the ecosystem. And that's our strategy.