AST SpaceMobile Scaling Toward Commercialization
Taking a Look at AST SpaceMobile's (ASTS) Business Update.
AST SpaceMobile’s Business Update
AST SpaceMobile (ASTS) recently shared their full-year and Q4 2024 updates, and while there may not be any show-stopping announcements at this stage, there's plenty worth watching. It seems that the company is laying the groundwork to commercialize its business while managing costs at a reasonable level. As it stands, ASTS seems to be gearing up for a commercial service rollout starting in 2025 and beyond, strategically moving forward without letting expenses get out of hand.
Key Achievements in Q4 2024
Operational Success: The first five Block 1 BlueBird satellites, launched in September 2024, are now fully operational. These satellites successfully conducted video calls with AT&T, Verizon, and Vodafone, proving their ability to deliver broadband speeds for voice, text, and data services.
Strategic Partnerships Expanding: AST has agreements with ~50 mobile network operators (MNOs), covering nearly 3 billion subscribers. The newly announced Vodafone European distribution entity will accelerate expansion across Europe.
U.S. Government Contracts: AST secured a $43M contract with the U.S. Space Development Agency (SDA), adding to its growing government business. The company believes this will lead to larger long-term defense contracts (overlooked).
Spectrum Acquisition: The company has signed a long-term spectrum agreement for 45 MHz of lower mid-band spectrum in the U.S., enhancing its ability to provide higher-capacity broadband services (up to 120 Mbps speeds).
Financial Strength: AST ended 2024 with $979.7M in cash, cash equivalents, and restricted cash, following a $460M convertible senior notes offering. This positions the company well for its satellite production and deployment plans.
Scaling Satellite Production for Commercial Rollout
ASTS is scaling its satellite manufacturing efforts to meet growing demand. The company is doing the following:
Producing 40 Block 2 BB satellites at its Midland, Texas facility, with long-lead components secured for over 50 satellites.
Expanding manufacturing space to 194,000 sq. ft. in Texas, 59,000 sq. ft. in Barcelona, Spain, and soon 85,000 sq. ft. in Florida.
Ramping up to a production rate of six satellites per month by the second half of 2025.
Securing launch capacity for up to 60 satellites between 2025 and 2026, ensuring the ability to deploy a full constellation.
Path to Commercialization & Free Cash Flow
Management reaffirmed on the call that ASTS expects to become FCF+ with ~25 operational satellites, as revenue from government contracts, MNO agreements, and infrastructure sales (gateways) begins to scale. The company aims to do the following:
Expand early commercial service with AT&T, Verizon, and Vodafone in 2025.
Achieve continuous service coverage in the U.S., Europe, and Japan by 2026.
Continue securing additional spectrum rights and regulatory approvals, including full FCC licensing.
Competitive Positioning & Market Opportunity
Unlike competitors such as Starlink’s partnership with T-Mobile, which initially focuses on text-based messaging, ASTS offers full broadband capabilities, including voice and video calling. The company’s direct-to-device approach, which does not require modifications to existing mobile phones, makes it a highly scalable solution for rural connectivity, emergency services, and enterprise applications. To be clear, this is still a major competitive risk and should be assumed at this point. However, ASTS seems to have the upper hand in terms of performance (more on that below).
My Take
This update was genuinely exciting. They’re still pre-revenue, but it looks like they’re on the verge of finally launching their commercial services. It’s worth remembering that management has run into delays in the past, so while I wouldn’t dismiss their ambitious targets from their calls, press releases, presentations, etc., a bit of caution is reasonable. Since they’re working in such a capital-intensive industry and plans to grow production, we can expect higher expenses as they ramp up, but it appears they have enough cash in the bank to fund operations until revenue starts rolling in (and some), a point the market seems comfortable with right now.
Let’s talk about the elephant in the room though: SpaceX/Starlink. They definitely pose a competitive risk to ASTS, but I don’t see this as a winner-takes-all market. Elon Musk’s recent high-profile involvement with the U.S. government has brought him a lot of attention, both positive and negative, which could potentially slow Starlink’s expansion. Meanwhile, ASTS is laser-focused on one goal: delivering full broadband coverage to people who need it. That said, Musk’s vast resources (and Starlink’s existing revenue) give him a clear edge on the capital side. If ASTS faces unexpected delays or major obstacles, they might need to raise more capital, while Musk, on the other hand, has near-limitless funding at his disposal.
However, ASTS has over 3,500 patents protecting its technology, which sets a high bar for anyone trying to match their performance and services. If Starlink wants to compete on that same level, they could run into intellectual property issues. And for any other potential competitor, the barriers to entry are already extremely high. All this to say, I don’t view this as a scenario where one player takes it all. The market is big enough for multiple players to coexist, and even if ASTS only carves out a small slice of the market pie, it could still reward investors nicely. So, while competition shouldn’t be dismissed, it doesn’t keep me up at night when I think about ASTS on the competition front.
It’s tough to nail down a precise valuation for ASTS, but one thing’s for sure: they’re part of the broader space economy, which is massive. High expenses are to be expected, but the upside could be huge. At the moment, the market seems to be pricing the company as though commercialization will go smoothly and revenue will start rolling in. That feels somewhat fair, but I’m still cautious, management has missed timelines before, and another delay could rattle The Street. All the same, I think they’ve learned from past setbacks. Delays are pretty common in this industry, but it’s tougher on a pre-revenue space company because there’s no income to offset the wait. Assuming things go well from here, I see ASTS being fairly valued around $8B–10B, given the momentum in the space sector. As for me, I’m waiting to see those satellites actually commercialized before I add more to my position. I’ve got a small stake right now, which has paid off so far because I sized it correctly. If the company really takes off, I’ll still benefit, but I’m sticking to my investment process and not going outside of it. Even if shares are expensive by today’s standards, the potential future value could make current prices look like a bargain, if ASTS delivers.
To those who went bigger at uncertain levels: congratulations. If ASTS continues to execute, it might become a mega winner for you.