This past week, despite its brevity, has been quite turbulent for the markets, affecting my portfolio as well. At the moment, I’ve been patiently sitting on my hands. However, I'm gearing up to actively contribute to my Roth IRA, focusing on accumulating stocks from specific companies: Coherus BioSciences (CHRS), Relay Therapeutics (RLAY), STAG Industrial (STAG), and Waste Management (WM).
In other news, the space economy has been in the spotlight again, particularly with SpaceX's recent announcement about launching Starlink's direct-to-cell capabilities. Interestingly, AST SpaceMobile (ASTS), a company in my coverage, offers a similar service. On this news, shares of ASTS tumbled nearly 20%. This development prompts a closer examination of what SpaceX's move means for ASTS and the broader implications of SpaceX's strategy. Let's dive deeper into this topic.
Direct Competitors Addressing an Unmet Need
SpaceX recently announced/achieved a significant milestone by launching a Falcon 9 rocket, on Tuesday, with the first set of Starlink satellites capable of beaming phone signals directly to smartphones. This initiative marks a significant advancement in communication technology for the company.
In August 2022, SpaceX, owned by Elon Musk, announced a partnership with several wireless carriers, including T-Mobile in the U.S., to utilize Starlink satellites for providing network access in certain parts of the United States. This collaboration extends globally, with carriers like Japan's KDDI, Australia's Optus, New Zealand's One NZ, and Canada's Rogers joining the initiative to implement direct-to-cell technology. The direct-to-cell service, which is currently set to begin with text messaging, will eventually expand to include voice and data capabilities in the future. T-Mobile, one of the key partners in this venture, confirmed that the satellites launched on the SpaceX Falcon 9 rocket are now in low-Earth orbit. However, the satellite service won't be immediately available to T-Mobile customers, as field testing is expected to start soon (this where ASTS has an advantage).
Sara Spangelo, SpaceX's senior director of satellite engineering, expressed enthusiasm about the launch of these first direct-to-cell satellites. She emphasized the project's potential for rapid expansion and its role in demonstrating SpaceX's advanced technology.
Mike Katz, president of marketing, strategy, and products at T-Mobile, highlighted the service's aim to maintain connectivity even in the most remote locations. He expressed optimism that with this technology, dead zones in network coverage would become obsolete.
This development is not just a technological leap but also a strategic move in the telecommunication sector, especially for ASTS. It illustrates SpaceX's commitment to expanding its services beyond traditional satellite operations, potentially revolutionizing how we think about and access mobile networks, especially in underserved areas (although ASTS was the first one on it).
So, What Does this Mean for AST SpaceMobile?
In my analysis, SpaceX's foray into direct-to-cell technology places them squarely in competition with ASTS. Initially, SpaceX's traditional Starlink service did not pose a direct threat to ASTS. However, their move into direct-to-cell capabilities changes the landscape, making them a significant competitor in this niche market. Yet, it's too early to declare SpaceX the superior option. Currently, they are in the early stages of field testing to evaluate the efficiency of their technology. The outcomes of these tests are crucial for assessing the potential and scalability of their endeavors.
Contrastingly, ASTS is significantly ahead in this race. They have already achieved text messaging and voice/data capabilities at broadband levels with their Blue Walker satellites. Moreover, ASTS boasts an impressive roster of partnerships and strategic investors, rivaling or even surpassing SpaceX in quality. Their partnerships include prominent names like Vodafone, Rakuten, Telefonica, and AT&T, supported by influential investors such as American Tower (AMT). Therefore, at this juncture, ASTS seems to have an advantage in the market.
It's important for investors to recognize that this market isn't a "winner-takes-all" scenario. However, if one competitor demonstrates a clear technological edge, it could scale more rapidly and emerge as the preferred provider in this space. This dynamic competition underscores the importance of continuous innovation and strategic partnerships in the evolving landscape of satellite communications.