Could SpaceX potentially dashed AST SpaceMobile's DTC Satellite aspirations for 2025?
Could SpaceX potentially dashed AST SpaceMobile's DTC Satellite aspirations for 2025?
Approximately four years ago, the up-and-coming space tech organization, AST SpaceMobile (ASTS) -3.25%, put forth a stunning proposition to investors during their SPAC IPO: For a mere $10 per share, you could invest in a company that aimed to revolutionize communication by enabling any off-the-shelf smartphone to make calls to another off-the-shelf smartphone, anywhere on the globe, directly via satellite (DTC).
AST insisted that this technology would significantly impact global mobile connectivity. The company estimated that it could attract up to 5 billion mobile subscribers, cornering a $1 trillion global mobile wireless services market, without ever needing to lay a single mile of fiber optic cable or construct a solitary cellphone tower. Instead, all AST would require was the construction and launch of a few satellites, and the activation of an extraordinary technology to accomplish what had never been done before.
However, AST remained tight-lipped about the specifics of their plan since the technology was highly confidential, and they were vehement about maintaining secrecy about its workings.
AST SpaceMobile: Can you hear us now?
To be honest, I was doubtful when I first learned about AST's proposal in 2021, and openly declared, "I wouldn't back this space IPO with a 62-mile pole." But now, given their recent milestones, I'm starting to second-guess myself.
Over the past few years, AST has progressed significantly, first conducting an international cellphone call from Texas to Japan in 2023 using nothing more than two Samsung smartphones and a satellite in space. Following that, they launched five BlueBird satellites in September 2024 to operate their network in the US.
Throughout this process, AST has secured significant contracts with prominent companies, including Verizon Communications (VZ) 0.98%, AT&T (T) 0.71%, and most recently, Vodafone (VOD) 0.83%. These contracts allow their customers to access what AST calls the "first and only space-based cellular broadband network directly by everyday smartphones." They've accomplished this by unfurling all five satellites in orbit and requesting permission from the FCC to begin beta service, potentially as soon as next year.
However, SpaceX may challenge their position.
SpaceX, the game changer
Billionaire Elon Musk hinted at his interest in taking part in this emerging market in 2022, when SpaceX announced a deal to build and launch Starlink satellites for T-Mobile US (TMUS) 0.03% customers to communicate in cellphone dead zones.
At the time, AST had yet to launch any operational satellites, but now, as AST prepares to release DTC service, it's likely that SpaceX now sees AST as its primary target and intends to vanquish them first.
And SpaceX is already taking measures to achieve that.
SpaceX makes its move
On December 5, 2024, SpaceX launched 20 new DTC-focused Starlink satellites into space, joining the six other DTC satellites that have been undergoing testing since January.
As CEO Musk announced on Twitter, SpaceX's "first orbital shell" of DTC satellites is now complete, enabling text messaging capabilities even in cellphone dead zones for T-Mobile customers. Future launches will carry additional DTC satellites to orbit, bolstering the service by offering voice and data capabilities in 2025 – the same year AST aims to enter the market.
The first Starlink satellite direct-to-cellphone constellation is now complete, providing unmodified cellphones with Internet connectivity in remote areas. While the bandwidth per beam is limited at around 10Mb, future constellations will be much more powerful. https://t.co/wJHMGEzzE4
--- Elon Musk (@elonmusk) December 5, 2024
At least, this will ensure that AST and SpaceX will release their services simultaneously. Furthermore, SpaceX's 5 times larger DTC satellite constellation (supplemented by nearly 6,900 additional Starlink satellites in orbit) can help ease the communication load by redistributing signals trapped initially by the DTC satellites across the broader Starlink constellation.
While AST is busy raising funds by selling stock to finance the launch of 20 more BlueBird satellites and 40 additional satellites thereafter, eventually building a planned constellation of 168 satellites, SpaceX clearly has the upper hand with its substantial resources and expertise. SpaceX's satellite fleet is 1,400 times larger than that of AST, and its market capitalization, providing it with the necessary financing for satellite construction, is about 70 times greater. (Reports suggest that SpaceX plans to raise funds that could value it at $350 billion, compared to AST's comparatively minute market cap of under $5 billion.)
It's an uneven battle. Regardless of fairness, the undeniable truth is that when pitted against SpaceX and its vast resources, AST SpaceMobile is facing an uphill struggle the entire match. If I had to gamble on this contest, I'd most likely put my money on SpaceX emerging victorious.
In light of SpaceX's ambitious plans, AST SpaceMobile might need to strategize financially to stay competitive. The company is currently raising funds by selling stock to finance the launch of additional BlueBird satellites, with plans to build a constellation of 168 satellites. However, SpaceX's substantial resources and market capitalization, which could potentially value it at $350 billion, present a significant challenge.
In the world of finance and investing, this situation is a prime example of how the larger, more established player can sway the market, potentially making SpaceX a more attractive investment option for those interested in the satellite communication market.