Closing Bell - Manifest Space: Dead Zone Busting Satellites with AST SpaceMobile CEO Abel Avellan 9/16/24

Episode Date: September 16, 2024

AST SpaceMobile has successfully launched its first five Bluebird commercial satellites, in a major step towards building space-based service for smartphones. Founder & CEO Abel Avellan joins Morgan Brennan to discuss the company’s direct-to-cell service, how the business model compares to competitors like SpaceX’s Starlink, and whether the company has the cash it needs to build out a constellation.

Last week, AST Space Mobile successfully launched the first five Bluebird commercial satellites to orbit. A milestone for both the space startup and its partners, including AT&T, whose head of networks, Chris Sambar, joined this podcast post-launch. Really, we're bringing satellite connectivity to the masses, and it's never been that way before. And AST is the first company to do this at scale, at data speeds over 20 megabits per second to a regular unmodified cell phone like you and I carry around all day. It's a future AST SpaceMobile's founder and CEO,

Abel Avalon, has spent years working towards. And while early service for the U.S. government will come online soon, more satellites will be needed to create continuous space-based broadband service. We are building the next batch of satellites. We have 17 of them in process right now. We start launching them starting early next year. It will be a launch campaign that we will announce pretty soon. And we expect to ramp up our production rate. We're building 17 today. We expect in the near future to get a capacity of 72 per year. ASTS stock rocketed in anticipation of this launch, trading as high as $38 a share in mid-August.

It was a $2 stock back in May. The price has come off a little bit since then, but Wall Street has taken notice. Deutsche Bank boosted its price target to $63 just earlier this month. There were many, many buses of retail investors showing up to the launch. We were really very happy to see that. But that's a reminder of really how this important is. For them, this is just not an investment. This is a collaboration to change the world a little bit for better. And this is basically a movement that has become in how we democratize access to knowledge and

information around the globe. On this episode, Avalon joins me to discuss next steps for AST's direct-to-sell service, how the business model compares to competitors like SpaceX's Starlink, and whether the company has the cash it needs to build out a constellation of volleyball court-sized satellites. I'm Morgan Brennan, and this is Manifest Space. Abel Avalon, it's great to speak with you. Fresh off this milestone, your first five production satellites, your Bluebirds in orbit. Walk me through this milestone. Well, we just launched the five largest objects

ever launched into low-end orbit with a mission to basically connect everybody's, every day's phone, the phone that people have in their pocket. And this is hugely important for us. We have done this together with our partners, AT&T, Verizon, Bell Canada, Rakuten, Vodafone. And we think that this will change the way that people communicate around the globe.

And it will make communications, broadband communication directly to the phone that everybody has in their pockets. A normal thing, a thing that happens every day. Great. And so far satellites are communicating and behaving as you expected? Absolutely. We're super happy with the performance of the launch. We place the five satellites into their expected altitude. We're communicating with all of them. They're all nominal. We're super happy with the result of the launch. So when does service start? Well, we're starting in a few weeks to fully deploy them. We will be

lighting up around 5,600 sales across the United States to cover all the United States. Obviously, as this is the beginning of the process of launching the services, that this will be for five satellites. It will not be non-continuous. The government will start using it right away. And the MNOs will start interconnected

to their core network and to their applications to start launching the service. So you said the government will begin using it right away? Are you contracting with the government directly then? I cannot talk too much about that, what exactly the relationship or what they're using it for, but what we have explained publicly, yes, the government is using the satellites for a variety of communication and non-communications applications. And you have, what, 17 more that are now going to be getting built out and launched as well. What's the timeline to complete your constellation? Yes, we are building the next batch of satellites. We have 17 of them in process

right now. We start launching them starting early next year. It will be a launch campaign that we will announce pretty soon. And we expect to ramp up our production rate. We're building 17 today. We expect in the near future to get a capacity of 72 per year. And before this launch, you announced that you'd be redeeming stock warrants. So the process of raising capital, what does that go to when we are talking about this constellation and getting the service online? Yeah, we announced that we already have around, perform around $400 million of cash that give de dinero que nos da suficiente capital para cumplir todas nuestras necesidades operacionales inminentes

y con eso hemos comenzado la producción de los satélites de NETBAT, esperamos que sea diferente de otros sistemas, solo necesitamos 45 a 65 satélites para continuous service in the United States. Other applications do not need the constellation to start generating revenue. So we're very happy where we are financially to support our plans of deployment. I was speaking with Chris Sambar from AT&T. I know you have this strategic commercial partnership with AT&T, their investor. He's on your board. He was saying he was hopeful that service, a robust service, perhaps ramps in 18 to 24 months. Does that sound like a realistic timeline? Well, we want to announce deadlines or service start dates together with our partners.

I mean, this is a service that goes strictly through the operators. We have service, as I said, starting earlier for the government. We had a service that is non-continuous also being rolled out as these five satellites get rolled out. But yes, we are in the process of launching to get to 45 to 65 for continuous service in the US. And we hope to do that in the course of 25, early 26. And then AT&T, you also inked a deal with Verizon earlier this year, and you mentioned some of your other partners as well around the globe. How to think about these different partnerships, especially when you do have

some direct competitors coming to work with you? Well, listen, there's 5 billion phones in circulation. 90% of the air surface do not have cellular broadband. This is a service that when one operator get it, the other need to have it. We believe to be the only true broadband service directed to cell phones. So you will see that we will continue to expand our relationship. We have 48 operators around the globe. We partner with them, we use their retail capability,

we use their access to the end user, we use their spectrum and yes you will see that in some cases these operators compete between themselves but each one of them has their own special features on a particular roadmap services and at the end really our mission is to make sure that every phone, no matter from which operator, no matter what kind of phone, and no matter where that phone is located, that they get access to broadband service around the globe. I know you and I have talked about this before,

but I'm going to go back there again because I think it speaks to the business model and what's particularly differentiated about AST. And that is at a time where we just saw Apple unveil their latest iteration of iPhones. We've seen this direct-to-sell market begin to take nascent shape here. I know Apple's partnering with folks like GlobalStar. How does this compare to that? Well, what is truly different, this is designed from the beginning,

A, to complement the spectrum of the cellular operator in all their bands. B, it is to be a true broadband service. I mean, this service will be for text, it will be for data, it will be for streaming, it will be for video, and it will be to really close that gap será para datos, será para el streaming, será para el video y será para cerrar realmente

ese gap de lo que puedes hacer en el medio de Nueva York, en el medio de Los Ángeles y lo que puedes hacer en un lugar remoto donde no hay ninguna infraestructura. Habiendo dicho eso, esto no es sólo para servicios en lugares donde no hay nada, esto también es Having said that, this is not only for services in places where there's nothing. This is also for complementing the service in places where it's supposed to be something, but it's not good enough. So that's why we have been focused from the very, very beginning. That's why we focused the hard route, which was build the satellite large, the largest ever launch into LEO, to really enable broadband connectivity. That's what it really set us apart completely of everybody else that had intentions to connect cell phones. So the hour technology,

which is supported for around 3,200 and more patent and patent pending claims, is based on launching large, powerful satellites that really can enable broadband directly to everybody's phones. I want to get into the satellites specifically a little bit more too. But first, I mean, we just saw SpaceX's Starlink in a deal with United Airlines. I know they're also working with T-Mobile, so they're working on the operator side too. You're very focused on the operator side, but is there ever a point in time where you say we're going to expand out and start talking to businesses or end users directly? Well, no,

our focus is to partner with the operator for a simple reason. There's 5 billion funds in circulation and growing with population. There's billions and billions and billions of dollars allocated to Spectrum. If you think about what has been allocated to us in the United States, but both the prime operators here, AT&T and Verizon, that's billions of dollars of assets that really become available to us to enable for them broadband connectivity. So now our focus is to go through the operators, is enhance their service, make it available everywhere in any kind of phone and get them to broadband everywhere, which is something that as a nation

is something that is needed, but also for the operators it's something very, very important to basically plan for the network properly and give that peace of mind to the users. And no matter where they are, they will be getting access to cellular broadband through space. And so the satellites themselves, you mentioned how big they are. I guess, what does it take to build one of these? And given the fact that these Bluebird production satellites that went to orbit are bigger, more enhanced than the test satellite that you first launched, how to think about how the technology is evolving? Yeah, in order to offer a broadband service directly from space to your phone, you literally need two things. One is, one that is very, very important, is comply with the regulations on how to share a spectrum between satellite and terrestrial.

For that, you need to be able to be very, very precise where you point your signals and make sure that those signals do not interfere with anybody else, as there's billions of people using that spectrum. So that's a requirement. For that, you need a larger rate. That's the reason why they're large. The other one is in order to have a true broadband service, and we have talked about how we went from 100 megahertz of processing bandwidth on our test satellite to 1 gigahertz, which is a 10 times increase increasing capacity in the current satellite

that we just launched this week, to 10 gigahertz within the satellite that we are starting to produce right now for launches next year. So it's the combination of size and processing bandwidth that what really enables true broadband service. Because one thing is providing services for few satellites, for few phones. Another thing is providing services for hundreds of millions, hopefully billions over time,

with a platform that really enables that. So that's the reason why these satellites are large. That's why we invented this technology. That's why we have so many patents, patent pending claims on them. Because this is a very difficult thing to do. You know, you're basically talking about flying at 17,000 miles per hour, something roughly of the size of a volleyball court,

and they may make it even bigger. So while at the same time you're broadcasting cellular broadband as you move around the globe. So this is, course we went through the process and invented this we went into developing numerous and numerous and numerous of technologies that now are reflecting in the satellite that we have built and now we're flying so we are super happy where we are with that. You have a very fervent retail investor base in AST. And one of the things that I thought was interesting was with this launch, you basically opened it up and invited investors to come and view it.

Did people take you up on that? Well, listen, the first thing, I'm super proud of that. I mean, I was moved really by seeing how people wake up at two in the morning. There were many, many buses of retail investors showing up to the launch. We were really very happy to see that. But that's a reminder of really how this important is. For them, this is just not an investment. This is a collaboration to change the world a little bit for better. And this is basically a movement that

has become in how we democratize access to knowledge and information around the globe. So yes, we're super proud with that. And this is a service that people can feel it, see it, and use it every day. I mean, this is, again, this is not only for when you are in a very remote place where there's nothing. This is also for connecting your phone, broadband. I will challenge anyone to tell me that he's not moving on a car, flying from, driving from New York to the Hamptons, you always lose connectivity or you're in the middle of a video call and the call drop. All those things,

our dream is to make it a thing of the past. So we have one investor that call it today. People are not expecting it. In the future, they will be demanding that broadband is available everywhere in everybody's everyday phone. That's what it really set us apart of everything else that is out there.

Well, it does seem like investors are getting excited about this capability as you move closer to it becoming a reality. I mean, your stock was trading at about $2 in mid-May and now it's up. It sold off a little bit last couple days. It's been sell the news event after the launch, but I mean, your stock is trading at just under $29 a share. And it does seem like some Wall Street analysts have been upgrading and getting more excited about the prospects here. So what would your message be to those folks as we do see this excitement in the market? Well, listen, we're just at the beginning.

We're really, really just at the beginning. We're participating in one of the largest industries that exist, which is cellular broadband everywhere. And we are supported by the largest operators around the globe. They really want this service. They're excited about this service. They're supporting us with their spectrum. And you had Chris from AT&T last week in your show.

So we are just at the beginning. And there's many, many good things coming up. We're super excited. But of course, my focus, my team focus is execution. We basically put in as many satellites as quick as we can in order to deliver services for our, for the public, for our retail investors, and for the government. So final question for you, and that is this direct-to-sell market. How large do you expect it to become? Well, we believe, listen, if you think about the size of the cellular market globally, it's around a trillion dollars a year.

I mean, then our view is a single digit percentage acquisition of that market. una adquisición de ese mercado en un par de dígitos es un mercado muy muy muy muy grande especialmente si este es un mercado o un negocio para nosotros que es intensivo de capital pero si lanzas este satélite el costo de operar en ellos es bastante bajo, así que hay muchas formas de pensar sobre esto si piensas que ves sobre los servidores tradicionales de satélite ways to think about this. If you see about the traditional satellite service providers that basically they needed to buy the satellites and then launch them, you can see an EVDA margin

north of 85%. So we are 95% vertically integrated. We have participated in a market where there is significant need for the service on a global basis. And Athlon is broadband, which is what we're doing. And we think that this is a very large opportunity participating in the $1 trillion global cellular market.

Avalon, it's great to speak with you. As always, congratulations on the milestone of AST SpaceMobile. Thank you. Thank you, Morgan. Pleasure being with you. 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.