Kook's Halftime: J.Leo, Golden Dome, Rocket Lab's Desperation & the Race for Spectrum

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[00:01:03] Speaker C: This is the AST SpaceMobile Podcast. We just basically come to 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.
[00:01:22] Speaker D: Okay, welcome to the England-Mexico halftime show. Uh, my cover got blown a little bit by the Bloomberg article because my buddy, uh, is one of my longest-term friends. When he read the Bloomberg article, he was like, oh, I know who that is. And so now he knows who the kook is. I'm sitting here wearing my, my Fly Shark shirt, and he's kind of asking me, he's like, so how do you do this podcast stuff? Like, do you plan for it? I'm like, nah, just make it up. So kind of funny, but this week, so we're going to try to jam through this in 15 minutes. I actually had like some more thoughts that were good to share, but I just want to start off with an interesting paradox of contrasts. And so I was talking to my boy DeMunk, who some of you guys know is like truly one of the OG researchers, and he certainly doesn't come from a traditional finance background. but his work is better than really any— anyone else's and is largely responsible for driving our awareness of the J. Leo contract. So what's interesting is I was, I was going over ASTS with my friend who's a really experienced and accomplished portfolio manager, and I was really curious kind of what the stock looked like to him. And so we were going over the way he would look at these things, and I kind of knew intuitively that ASTS has what we call high idiosyncratic volatility. which is to say that things related to ASTS drive the stock less so the market. And so if you're invested in Walmart or something, the market's going to like drive that stock a lot as opposed to Walmart-specific things, or take like a REIT. ASTS, well, ASTS things drive ASTS, and so it has very high idiosyncratic vol. And so something that's really interesting to me is you take someone like DeMunk who's sitting there, just maniacally finding stuff. Well, the return on that is very high because ASTS has extremely high idiosyncratic volatility compared to any other security really out there, which means that the return that we get as a space mob on our effort to research this is incredibly high. It is literally one of the best stocks you can pick for trying to find edge. Doesn't mean we're right, doesn't mean it will go up, it does mean that this is one of the best uses of time for a research effort because ASTS things very specifically drive the vast, vast majority of ASTS volatility. So interesting concept. I can talk more about this on another week when we're not under the gun. But so we had a lot in what should have been a quiet 4th of July week. Companies showed us that the supply chain continues to be pumping at breakneck speed. We got another video of the Antonov. I personally think that tomorrow we might get some news. They tend to prep for news by giving us sort of like a teaser tweet over the weekend. We've gotten a couple. We got the Ireland testing, the Antonov. I think the Antonov was last week, but we had the Ireland testing and then we got confirmation in Japan around the JALEO contract. And so we have the documents. I've shared the sources. They're in Japanese, but they say Rakuten Mobile winner. And what we're learning is that this contract might be a lot bigger than we expected. And so it might ultimately support a gross investment of $2 billion, which is a lot of satellites to build a Japanese constellation. And then how it is structured from there, we don't know, but we can speculate. And it's all very positive. There's a real pathway to have a Japanese sovereign constellation for their purposes, but then also really help provide leverage to ASTS and building out the overall global constellation. There's some other really cool coincidences. And so of all of the weeks, why is it that Japan is adding launch capacity through MHI? Well, what we do know also is that local content is going to be a big deal as part of JLEO. They want to have the full value chain supported by Japanese content. So not just ownership, But satellites, which we'll see how they deal with that, but also launch. And so my strong suspicion is that we're going to see a multi-launch agreement formally with some real capacity on MHI that supports the satellites that are then sold into the Rakuten AST joint venture, also known as RAST. So a lot of things start to come together. And as we talked about previously, don't worry about what you're worried about today. Worry about what you should be worried about in 6 months. So if you're worried about launch capacity today, think 6 months out. If you're sitting there and there's 15 to 25 satellites spoken for on MHI alone, never mind all the satellites we'll have on F9, never mind what we're likely to have with ULA and then Blue Origin. All of a sudden, today's concern about launch capacity looks really silly. There'll be something else to worry about, but don't worry about that is my view. So you can see where the puck is going overall. There continues just to be this trend toward sovereignty. And so this is a big deal. It's not going away. Reformed Trader, who formerly used to be known for his technical analysis and now has been corrupted by us to be a fundamental guy, found an article about Paris complaining about Palantir. They're worried about overreliance on US providers. This is why the So the companies that are not just the mono infrastructure emanating from the US expecting everyone to eat off a red, white, and blue plate, the companies that can provide solutions that are tailored to the security and needs of individual countries are going to have a big leg up. So this is an important trend. It's one that we've thoughtfully gone through and wait, You know, another 15 seconds and then boom, South Korea is out with the same narrative on we also need a constellation. For those newer to the stock, it's worthwhile to note ASTS has believe they actually had an investment from the Samsung Next Fund as part of their cap table. They had letters of support to the FCC from Samsung. Good relationship tested heavily with Android. So there's already a nexus to South Korea. Again, a country that can't possibly support its own constellation. in its simplest form, likely to be doing some other JV-type structure to get what they need, but then figure out how to make it economically viable. You can see where this is going to go. So then the update from ASTS about FirstNet was really FirstNet, except for not the US one, continues to pick up cadence. And so another Smith here pointed out that the People in the photo related to the Vodafone update is the coordinator of the European Union Critical Communication Service, EUCCS. And so he points out, this is telling you what's about to happen across the entire EU in terms of ASTS providing the FirstNet-type services. This goes to the pillar of the government business, which I believe is going to be at least $1 billion for FirstNet in the US, and then just sort of multiply that through. You could very quickly start to have government service business revenues from ASTS on a global basis of $5 to $10 billion, and that's before you get to military. And so important to realize the system was built for safety, unlike SpaceX, which is a bunch of piece of shit vaporware. ASTS was specifically designed to deal with voiceover LTE and allow it to be compliant with the emergency interoperator roaming control and basically 911 service. SpaceX can't do it. That's why they're going to have a really hard time doing this type of service and meeting these sovereignty goals countries have. We had another really cool piece of analysis from Rocket Tank, again, a real expert. I actually have this full document up on my computer. Haven't read the full thing yet, But it's inside baseball. And so it's all the deliberations by the Bahamas thinking about how they're going to solve this problem. And you see the same kind of issues come over, up over and over again. It's really, how do you work with existing MNOs? How do you prevent interference? How do you provide the normal safety models? How do you sort of bash on SpaceX a little bit? Because that's what everyone does. Which bands of spectrum do you use? All these sorts of things. So it's really good insight into how this happens. I need to more thoroughly study the full document, not just this tweet thread. Maybe I'll do that tomorrow when I'm on a plane, but it's posted there for your benefit. Now let's talk about gain. And so Redrum had a tweet, and it is a retweet of Katzi. And so he explains it as the cat translator. And Kathy had showed, you know, what happens in terms of the tests we have in Ireland. And so it's showing that we're able to do 21 decibel— decibels of gain. And so it's 5 decibels from, I believe, what the prior test was. Remember, these are measured in things that are on base 10. And so a 6 decibel pickup in signal strength is a really big deal. And as Redrum points out, if you have a signal-to-noise ratio of 16, it's pretty good. When you go to 21, it's blasting. And so that's what allows these services to work extremely well, both for the bandwidth, but then also the reliability and also working indoors. All of these things are going to be important for all applications, but then also very specifically for Public safety. And now let's check in with our European correspondent Peter Lindmark, who what did he write about? What was I talking about?
[00:11:24] Speaker B: Oh yeah.
[00:11:24] Speaker D: So anyway, the company updated their website now saying that speeds are over 150 megabits per second. This had previously be would have been 120. So the company's clearly making advancements on its product performance. And this goes to the thing that I was talking about where the product roadmap for this company is never going to be static. What they say they're going to do in a given period will then change because they don't stand still. Abel is pushing his team. His team is innovating. This is what attracts good people. And so the technology we have today, which is the best that is available anywhere, is not going to be what we are relying upon in 2 to 3 years. Which is what makes it so hard to catch up with a company like this. It's like trying to catch up with ASML. If you could spend the decade to catch up with their chip making machine, great. But where are they going to be when you catch up to them? Same is going to be true for ASTS. Where are they going to be when and if anyone catches up to them? And the answer is, it's really hard. When someone invents a market and knows exactly what they're doing, they're necessarily always going to be many steps ahead of anyone that's trying to play catch up. In my personal view.
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[00:13:24] Speaker D: So we also had an interesting, uh, observation by No one has a straightforward screen name. So this, I think, was actually a Japanese person contributing. It was a very interesting point is that Japan has already signaled an intent to participate in Golden Dome.
[00:13:46] Speaker C: Okay.
[00:13:46] Speaker D: Interesting. Makes sense. Huge ally only getting stronger. And they made the point that JLEO is not only just about Rakuten and ASTS with emergency services, This also starts to indirectly provide Japan's contribution to Golden Dome. I hadn't thought about that angle, but it makes a lot of sense. It's like why all these NATO countries also buy F-35s. That's part of their contribution to the overall NATO flight or fighter jet capacity. So that's pretty interesting. And now let's go to spectrum. We're not going to dwell too much into this because it will either happen or it won't, but Grain, Management got approval for its spectrum, 7 megahertz by 7 megahertz, basically the same as what Iridium has, although it's not global, it's in the US, but it's good low-band spectrum. T-Mobile is supporting it. ASTS is in the docket supporting it. You start to put one and one together. Brendan Carr is demanding that it's going to be used for D2C, but most importantly, demanding that it's not going to be used. for squatting. So it's basically the thou shalt not be Charlie Ergen decree is really what I read in this because people are pissed at Charlie. And so this spectrum's going to get used. So who can use it? Well, ASTS. I saw some other stuff. There's a glancing theory that maybe it's going to be used for utility stuff. I don't know. Sure looks like this approval then means Grain is able to negotiate with ASTS, get some, probably some sort of lease agreement or profit share, and boom, we just got more spectrum. That's what I think happens. So now let's talk about TAM. TAM matters. TAM is what drives multiples. There's this new account I've never heard of, Ampanman. I don't know, might be a bot, but this bot maybe has something to say. And it's Vodafone Spain in Almería to test AST SpaceMobile for applications in the agricultural sector. Oh wow, cool. That's TAM. And so, and it's a big one. If you look at John Deere, Caterpillar, all these guys, the contract opportunities for agricultural assets is massive. All of these machines are right now, people are kind of strapping Starlinks to them, or there's another company, I just can't remember the name of it, even though I looked at it. Nimble. There's another one that would kind of enable this stuff. And so you're seeing just what the TAM is going to be here. As I was telling the guy I'm staying with, it's not just about the consumer applications, which I was telling him, I was like, look, every woman in the world is going to sign up for this. It's also about the IoT, the government, the military, the displacement of towers in rural areas. I'm right now in a part of New York where certainly not for lack of money, people have no cell phone coverage because people don't want towers here. So everyone's running around here, and no one's cell phone works ever. And so, you know, think about the ARPU of some of these places. It's very, very high. Whether you can segment the market that way, unclear, but the demand will be there. And SpaceX continues to just make this point for us. They keep saying that the mobile opportunity is even bigger than providing Wi-Fi in homes. And literally, I'm sitting at my friend's house right now. He has a Starlink system, Just as a backup for his cable system. And so he, you know, look about the price he's willing to pay, the $55 to $100 a month, just in case his cable goes out because he can't risk not being on a Zoom call. So he's willing to blow quite a lot of money just as a 1% probability per month he needs to use it. We were actually trying to use it yesterday because there was a storm. And so these are the types of people that are going to easily pay $5, $10 a month for backup cell phone capacity. And now let's talk about other things you do on cell phones. WhatsApp. I still think Meta, it's the most sensible thing in the world that Meta is going to have some sort of relationship and/or deal with ASTS to make WhatsApp work everywhere, but also to then have more control over how WhatsApp can work. When you start to dial all this stuff together, again, let's check in with this account called Anpanman, and he does some math just to show you like what happens with You know, X dollars of ARPU with, you know, X numbers of users, multiply that through, assume a multiple, and, you know, bingo bango, what does that work for a target price? You know, this guy here, I happen to agree with him just this once. I've kind of come out to like a real good upside, certainly an upside case, not a base case of $2,500 a share is something you can kind of bridge to. Now, it doesn't need to go there for us to have a good outcome, but you can kind of do it. Meanwhile, the pressure continues to build on SpaceX. They're getting hit on all sides. Their fixed broadband business, there's going to be a lot of competition from Kuiper. They hopefully are about to lose their T-Mobile contract with, or they're hopefully about to lose their T-Mobile contract to us. And, you know, they're going to have some problems and there's a ton of Rocket Lab rocket Rocket Lab capacity. There's a lot of rocket capacity coming. A lot of things are going to disrupt this story right as lockups come in. So it's sort of the SpaceX squeeze might be something we start to really see over the next couple months. Meanwhile, Blue Origin is doing their comeback tour, really showing how they are ready to rock. But in the same vein that MHI is increasing capacity out of the blue, India too. And so India is adding more power to their rockets. which would seem to allow the vehicle we went up last time, the LVM-3, to be able to carry 3 Bluebirds. And one might think perhaps there is also then an Indian JV coming as well, which would make all the sense in the world. And we're going to have some more local content to then get some capacity in India as part of other Indian initiatives. And again, it just goes to how quickly the launch capacity narrative can change. We also had Rocket Lab sort of admit their problem by buying Iridium. So an $8 billion deal changes their narrative. Interestingly, it's exactly the opposite of what Peter Beck said they were going to do. Looks like the game just started, so I'll wrap up shortly. And so they previously said they're never going to do this. Lo and behold, they do it. They're looking like they're desperate because they're seeing what SpaceX did. Now they're seeing the success of ASTS. They're seeing what Blue Origin's doing. This looks a little bit like a desperation move. And the thing that's just astounding to me is people then like doing basic work in Iridium on the Rocket Lab side, and they're like, look at these cool phones. My God, a satellite phone. It's like, who's going to tell them? And so it, I thought some of these things were a joke. Then I'm realizing these people are dead serious as they're kind of learning about Iridium for the first time. And they're like excited about providing this like shitty narrowband services. And so anyway, Good luck. Good luck to Rocket Lab. And then all questions are on ViaSat. So ViaSat, you know, is perceived to be the next one to go. Unclear who the buyers are. I think that they're likely to find a deal with ASTS as part of an activist campaign on ViaSat and their spectrum. You know, as they say, their spectrum are belong to us. And so it would seem that ASTS is going to have sufficient leverage over them to figure out a way to get their global S-bands. spectrum to pair with Legato, as it should be. But we'll find out. Legato is happening on our side, which makes Viasat put in a tricky position because there's a gaping hole in the world's most valuable telecom market that they don't control called Legato. So that's what I got. We were able to fit that into a halftime. Now I am absolved of my responsibility. I know I was kind of freaking out, like, what happens if I don't? If I don't do the Spaces, will the world end? And then people were piling onto me, so I succumbed to the peer pressure. But my wife is now texting me saying the game is back on. So I know everyone else wants to go watch the game. Thanks for tuning in. I think next week's going to be exciting because now it's a full week. I think the company's going to announce Patch 2 is shipping. It wouldn't surprise if we get a formal announcement on JLeo. What else do I think could happen? But that's probably all we'd need to have happen for exciting things. Oh yeah. And it looks like the Batch 1 satellites are unfurling or in a process of unfurling. So that's been exciting. I've been watching all that TLA data. I just haven't been posting 'cause I'm traveling. All right. Have a good one, everyone.
[00:22:26] Speaker C: 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.
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[00:23:01] Speaker C: Listen. Mmm, waffles.