Closing Bell - Manifest Space: AST SpaceMobile Partners with Verizon with AST SpaceMobile CEO Abel Avellan 5/29/24

Episode Date: May 30, 2024

Verizon is the latest telecom giant to partner with AST SpaceMobile, a small cap satellite operator. Founder & CEO Abel Avellan joins Morgan Brennan to break down the deal’s details, the company’s satellite constellation and future work with government contractors. 

Shares of AST Space Mobile rocketed higher on Wednesday, quadrupling since just the start of May. Verizon became the latest telecom to strike a partnership with a small-cap satellite operator, which is building a constellation for space-based broadband service to unmodified mobile phones. The deal includes a $100 million commitment for AST, including prepayments and a debt investment by Verizon. AST SpaceMobile CEO and founder Abel Avalon says the company has 45 agreements, and this builds on a business model enabled in part by longtime partner AT&T, which inked its own commercial deal with AST just earlier this month, and today actually welcomed the news involving its rival.

They provide the spectrum, they provide the customer base, billing, all the back office, all the marketing and infrastructure. We provide what in essence is the space infrastructure to enable any phone to connect to it, regardless of where people is. AST will launch its first five operational satellites, which will be the largest spacecraft in low Earth orbit behind the International Space Station, as soon as this summer. Continuous service will come by 2026. It speaks to the growing demand for continuous connectivity in an AI and autonomy enabled world. Connectivity is required everywhere.

I mean, connectivity is now not only connecting people, but connecting machines and then interconnecting them in an intelligent way that you can predict what things will happen, how traffic will flow, where people will be, and how all of that interconnected to each other. It is a massive opportunity. So our ability to basically be everywhere and to connect literally anything everywhere with the largest face arrays ever deployed into space, it is a massive opportunity. AST is on the forefront of the nascent direct-to-device communications market, which also includes Starlink as SpaceX partners with T-Mobile, and Apple, which is spending heavily on its

GlobalStar-enabled emergency SOS service. On this episode, AST SpaceMobile's CEO, Chairman, and Founder lays out the Verizon deal details, discusses the company's next-gen satellites, and hints at the opportunity to work with government as its service comes online. I'm Morgan Brennan, and this is Manifest Space. Abel Avalon, CEO of AST Space Mobile. It's so great to speak with you today. Thanks for taking the time. No, thank you to you, Morgan. My pleasure being here. So you've had a very busy May. You've struck a partnership with, or I guess it was officially a commercial partnership with AT&T earlier in the month. And now today, where we'll start this conversation, a new

partnership with Verizon. Walk me through the partnership with Verizon. Well, yeah, this partnership is about getting everybody connected in the United States. It's to provide 100% coverage de la área geográfica de los Estados Unidos utilizando tanto AT&T como Verizon Spectrum para cubrir todos los Estados Unidos. Así que esta es parte de nuestra misión de asegurarnos de que cada americano tenga acceso a la conectividad, no importa donde vivas o trabajes. Y estamos muy orgullosos de tener Verizon, muy excited having Verizon join our journey in getting every American connected to the internet with their phone in their pocket. Yeah. And I think that's what's so amazing about it is we're really talking about this nascent market of direct to cellular device connectivity, no modifications needed. You've really cracked the code on this. Absolutely. We have been working on this for long. We have 3,400 patent and patent pending claims.

We have done all the industry first, first voice, first video, first data downloading, 4G, first 5G connectivity. And now we have the two major giants in United States working with us, making sure that we have connectivity for everybody. So how is this going to work? Once you have a constellation in orbit and you're able to actually provide the service, are consumers going to know when they're utilizing space to make their phone calls? Well, the idea is to make this completely frictionless. So the user actually do not need to know that it's on satellite. This system is designed to connect you, wherever you are, with whatever phone you have. You may be camping, you may be driving

from the Hamptons back to New York. There's always a spot there that typically doesn't work well. de Nueva York, siempre hay un lugar que no funciona bien o en cualquier lugar de los Estados Unidos, donde sea que tu sistema de teléfono no funcione como debería, estaremos ahí para ti. Eso es lo que este sistema hace, es permitir la conectividad 5G sin importar dónde estás, sin importar el teléfono que tienes en tu bolsillo y ahora con este acuerdo en un espectro premium con excelentes And now with this deal on a premium spectrum with excellent penetrations for fuselage, cars, and everywhere, regardless where the user is. Okay. I want to get into more of that and the timeline around that. But first, in terms of the deal with Verizon, how did it come about? And I thought it was interesting to see that you have deals now, partnerships in place with literally the two biggest wireless carriers who are also rivals. So how does that work? Well, listen, we have been working for years now

in developing these relationships. We have 45 relationships and agreements around the world. We started with AT&T seven years ago, working on their technology, working on the spectrum, doing testing with them to get to where we are now. Verizon is a national progression of that. And also the ability for both of them to provide their spectrum into our network is really what makes it different here we now have premium 850 spectrum that cover every inch of united states uh almost every inch of united states to basically assure

users that give the peace of mind to users that wherever they are, they will have 5G access. So we work with both of them in developing a technical approach to achieve that, reusing their spectrum, the spectrum, the 850 spectrum, which is a premium spectrum that is on everybody's phones already. So the spectrum, so they provide the spectrum. It is on everybody's phones already so the spectrum so they provide the spectrum it's on everybody's phones already you provide the space-based infrastructure to actually access and enable that spectrum in places where terrestrial infrastructure doesn't work that's exactly right they provide they provide the spectrum. They provide their customer base, billing, all the back office, all the marketing and infrastructure. We provide what in essence is the space infrastructure to enable any phone to connect to it, regardless of where people are.

And AT&T has been a longstanding investor in AST Space Mobile, but part of what this news today with Verizon involves is that Verizon is going, I'll call it essentially a raise for AST, prepayment, some of them with conditions, and a debt investment by Verizon as well. So what does that, for lack of a better term, cash infusion mean in terms of your ability to build out this infrastructure? Well, this is super important for us. I mean, we more and more are getting closer to operationalizing our technology. Our focus has turned from raising equity to raising prepayments and commercial agreements. So Verizon agreement is mostly a prepayment agreement. de la creación de renta a la creación de pre-pagos y acuerdos comerciales. El acuerdo de Verizon es principalmente un acuerdo de pre-pagos,

también con una nota similar a la que tuvimos desde AT&T, Boda Fon y Google, pero el bulk del acuerdo es en realidad un pre-pago. Esto sería parte de nuestra fórmula. Tenemos 45 acuerdos alrededor del mundo. Tenemos una línea de clientes que realmente quieren tener acceso a nuestro sistema agreements around the globe. We have a line of customers that really want to get access to our system. And when they prepay and or invest, they become a priority for us in our country lineup

and in our prioritization for our network. So we said in December that it will be our blueprint or continue to finance our system. Okay. First five satellites in low Earth orbit by the end of this year, is that the game plan? Yes, well we have Blue Walker 3, have been in operation for two years. I mean we had the first five operational satellites that will be used for commercial use this summer. We're super excited about that. Also, our government is planning to use it as it's using a Blue Walker 3, the one that we had in operations. And yeah, we're very excited about that. We're working very hard

to be up this summer. The government's using your service? How are they using it? There is, I cannot comment on what they use it for, but obviously there is a big interest from our government in using our technology. Our technology is clearly dual use. You have basically what in essence are the largest es claramente de uso duro, básicamente tienes lo que en esencia son las cosas más grandes en el espacio,

la gran, la gran navegadora espacial en Leo, la única cosa más grande que nosotros son las estaciones espaciales internacionales así que eso nos permitió entregar 5G de forma directa a todos teléfono y para entregar la única aplicación de broadband que es realmente sostenible con pocos satélites con 90 satélites tuvimos un servicio global con 45 a 60 satélites tuvimos un servicio continuo en los estados unidos pero el gobierno también tiene una multitud de aplicaciones comunicaciones y no comunicaciones para usar esta tecnología que se hizo en los estados unidos applications, communications and non-communications to use this technology, which is made in United States, fabricated in United States, and with a multitude of dual uses, government and commercial. I mean, what you just described in terms of size of your satellite. I think about Starlink with SpaceX, which competitor, they've got thousands, right? More than 3,000 satellites on orbit. The fact that you're talking about a

constellation that's going to be less than 100, just how big are these satellites and how does that speak to the way you're building them and the launch cadence for them. Yes. We have focused on building a technology that is, A, sustainable over decades. So for that, we developed 3,200 patents about dependent claims on how to do this. They are large. Our block one, the ones that we're launching now, are eight meter by eight meter arrays,

roughly 24 foot by 24 foot. So almost like the size of a tennis court when they deploy. The next generation is actually bigger. It's approximately three and a half times bigger than those. possible is really with few satellites have broadband connectivity to everybody's phone and also to enable a multitude of government applications that are possible when you have a large structure flying low to earth and with the ability to generate a lot of power to be transmitted back to earth. So this is a very specialierra. Así que esta es una tecnología muy especial, no nos centramos en cantidad, nos centramos en calidad y en el tamaño de nuestros satélites. También recientemente anunciamos que estamos en el tapón

para nuestro chip de ASIC. Hemos estado progresivamente añadiendo capacidad a cada uno de estos satélites. El primer satélite tenía aproximadamente 100 megahertz of processing bandwidth. That's the amount of capacity that you can pass through them. This one would be 1 gigahertz. That's a 10 times increase. And now our own chip, we will have a 10 times more. So roughly 10 gigahertz of capacity that we can process for every single satellite. So one of our satellites equate to many, many hundreds of other smaller type of satellites and with the ability to do broadband to everybody's phone. So as a Verizon or AT&T customer, when am I going to have this continuous

connectivity that is at least in part enabled by AST? When does the service roll out in a much bigger, broader way? Yeah, well, we're starting partially this summer. We will have the broadband capability on these initial five satellites. The thing you will not have it all the time. So you will have it, you have what is called non-continuous. So you will have several times a day, the satellite will pass and you will have services. Así que tendrás varias veces al día, el satélite pasará y tendrás servicios. We started commercial service with these five. We had with this initial financing and on the back of the contracts and also the way that we'll continue to finance the program, we will be adding more satellites in 25 and 26 to get to full continuous service.

Got it. So how do you see this competitive landscape, I guess, materializing and evolving then? Because I realize it's still a pretty new market. We just talked about Starlink. I realize Apple has the emergency services through Global Star. How does all of this come together? What does this mean for consumers and businesses before the end of the decade? Yeah, I think this is great for consumers. Now they have the liberty to live or work wherever they want. They can be wherever they want to be and they will have access to broadband.

So I think this is, you know, liberating a consumer where they want to be, work or play. So this is, we believe, a game changer. For people in emerging markets, it's also a way to leave them out of an economic system that really don't provide equal opportunity for everybody. Not everybody had access to connectivity.

So we see our leadership on this solidifying. We have the two largest operators in the largest wireless market in the world. We have one of the largest lideres chip en este solidificado tenemos los dos grandes operadores en el mayor mercado de wireless en el mundo tenemos uno de los grandes jugadores también como un inversor un primer inversor un primer consumidor vodafone uno de los líderes en europa y áfrica e india y tenemos 45 acuerdos alrededor del globo así que empezamos inventamos esta tecnología que inventamos inventamos siete a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a So it's taking advantage of the early lead that we had on the technology that we invented, we patented, we deployed,

and where we did the first ever connection from space directly to everybody's phone. What's the bigger opportunity? Is it U.S., North America, or is it international when you think about future business models? Well, we believe that the U.S. market is, I mean, it is one of our very, very large opportunities. I mean, the U.S. market, you had a very high disposable income compared to emerging markets. That's why we focus in initiating our service in the United States Europe, and developed countries, or countries where the MNOs are investing and prepaying for their services. So the U.S. is the largest market by far. The ARPU here is sometimes a multiple of what you see in emerging markets.

So what we see is, in terms of the possible income, ARPU per subscribers, the US being the primary market, but then in terms of number of users, emerging market is very attractive, but a much lower ARPU. Basically because the possible income is lower than the possible income in the United States. So we think they are both equally important, but also when we combine the opportunity with our government and now with AT&T and Verizon, we're putting a lot of focus to the U.S.

In a world of autonomy and the rollout of AI, what's the opportunity like there? Well, we think, I mean, you know, the connectivity is required everywhere. I mean, connectivity is now, not only connecting people, but connecting machines, and then interconnecting then in an intelligent way that you can predict what things will happen, how traffic will flow, where people will be, and how all of that interconnected to each other it is it is it is a massive opportunity so our ability to basically be everywhere and to connect literally anything everywhere with the largest face arrays ever deployed into space it is it is a massive opportunity you know what's interesting ast stock it's got a very large retail investor base,

and it moves very dramatically as it's doing on this Verizon news as well. It's been called by some part of the meme stock class. I wonder what your thoughts are on that? Well, listen, I mean, we love our retail investors. They have been very loyal to us. They have been patient with us. They have been in this journey with us. And we care about them as well as we care about our institutional investors. So, we are in a mission to connect everybody. Ultimately, the same retail investors are also to be users of our system. But at the end of the day, we focus on the long term.

We focus on having a technology that will be relevant for decades to come, partnering with the best of the best in the wireless ecosystem that we are demonstrating with AT&T and now Verizon

and the 45 telcos that we have around the globe. Abel Avalon, it's great to speak with you. Thank you so much for the time. Thank you. My pleasure. That does it for this episode of Manifest Space. Make sure you never miss a launch

by following us wherever you get your podcasts and by watching our coverage on Closing Bell Overtime. I'm Morgan Brennan.