Closing Bell - Manifest Space: Iridium & Qualcomm Partnership Dissolution with Iridium CEO Matt Desch 11/10/23

Episode Date: November 11, 2023

After striking a partnership with satellite communications company Iridium, Qualcomm has backed out of the deal. Scrapping its SnapDragon satellite plans, Qualcomm noted in a statement that smartphone makers have “indicated a preference towards standards-based solutions” for satellite-to-phone connectivity. Iridium CEO Matt Desch joins Morgan Brennan to share his insights, the next steps for Iridium & the case for the satellite-connected smartphone market.

Last January, chipmaker Qualcomm struck a partnership with Iridium Communications to provide satellite-to-phone services. The plan? Offer a satellite SOS feature for Android phones that would rival the one provided by Apple with GlobalStar on the latest iPhone models. It's something I discussed just recently with Iridium CEO Matt Desch on this very podcast. We're not really involved in that. That's really all common there, their OEM. So still, you know, the technology works very well. It's been tested. It's ready to go. And someday I expect we'll be deployed.

Except it won't. At least not as this specific technology within this specific partnership. On Thursday, Qualcomm scrapped its Snapdragon satellite plan, It won't, at least not as this specific technology within this specific partnership. On Thursday, Qualcomm scrapped its Snapdragon satellite plan, saying in a statement smartphone makers have, quote, indicated a preference towards standards based solutions for satellite to phone connectivity. In an exclusive interview today, Iridium's Desh rejoined me to share his insights and reiterate that this won't change financial guidance for the company. Smartphone providers, well, at least Android ones, didn't want to really pay much extra for satellite access and didn't want to be locked into a single chip provider or a single satellite provider for that matter. But, you know, that's understandable. But it really means that the market for saving lives and providing access to remote, you know, off the grid is really being left open kind of to Apple primarily today. On this episode, we discuss next steps for Iridium

and why the nascent market for satellite-connected smartphones is still so promising. I'm Morgan Brennan, and this is Manifest Space. So since the last time we spoke, you've actually just disclosed some news, and that's the fact that this partnership with Qualcomm, working on technology for smartphones to bring that satellite-based connectivity to devices has been dissolved. Why? Well, I think you'd have to ask them. We were expecting it to move forward. I think they were unsuccessful at being able to sell it to OEM providers, smartphone providers at this time. So I decided not to move forward. So we're going to move on and work with others instead. I know one of the things Qualcomm has said is that the OEMs that they were working with or looking to work with

had indicated a preference towards standard-based solutions. What does that mean and how is it different than the technology that you had proven out in this partnership with Qualcomm? Yeah, well, I think it means that smartphone providers, well, at least Android ones, didn't want to really pay much extra for satellite access and didn't want to be locked into a single chip provider or a single satellite provider for that matter. But, you know, that's understandable, but it really means that the market for saving lives and providing access to remote, you know, off the grid is really being left open kind of to Apple primarily today as really all the standard-based solutions that are potentially out there right now are inferior. You know,

they're regional at best. They come from geostationary-based operators with all the issues that those entail. So, you know, we've announced and we are developing standard-based interface to our satellites, but that will take some time. And when we do, the good news is it will mean a truly global and reliable service because that's really what we do, you know, and that's in everything we do. But in the meantime, you know, we think that there still may be some smartphone providers who want to implement us in a shorter time frame for their competitive advantage. So this announcement from Qualcomm really just delays our entry into this market as opposed to anything else. And it doesn't really change our growth plans or really the cashflow story that we have in the long run. Yeah. And you did say that in the disclosure that this

does not affect full year 2023 guidance or some of the other guidance that you have put out at your recent investor day. What does it enable though? And you kind of just touched on this in terms of the ability to now partner with many different other players within this nascent market. Well, we've had other discussions with other people who wanted to work with us more directly. And we've re-engaged those now and think that those could bear fruit. It could mean potentially being embedded in other devices before we implement standard-based solutions in a couple of years. How would you characterize this new market? I mean, you mentioned the fact that now, at least as it stands currently, it's really

Apple and no one else that's participating. But we do talk about this market to connect these unmodified phones directly to satellites. There is this expectation that it is coming and coming on a bigger scale. I wonder what your thoughts are on that, on the competitive landscape around that, and when more folks that don't have iPhones, new iPhones in their hands, are now going to have access. Yeah, I'm pretty positive on the idea. Obviously, I'd love to have one as I think everyone would. I've been a little bit more pragmatic than some in the industry about it, saying that I think it will take time. And there's still a lot of

questions about what the user experience will be for people, whether people will pay extra for these things, who is going to pay for it. Apple apple's providing it for free today others have talked about free but someone has to pay for satellites and satellite service over time so and exactly what will you pay um and and what will it be uh what will it what will it look like when you get it so there's still a lot of questions about that um our solution um is really focused on doing something and doing something very well and doing something extremely global. And that's really what was, I think, appreciated here. You know, the technology worked really well.

No one's denied that just like everything else we do, it works. It works fine. It's just perhaps the business model still isn't quite there yet. And and there's still some questions about, you know, how fast it will be adopted and who will pay for it and all those sort of things. And, you know, we got kind of caught up in this. Our model is a wholesale operator. We work through partners like Qualcomm,

and they really have the relationship with the end partner. So we didn't have as much visibility really into that right now. And, you know, this one isn't paying off, but I think future ones will. How much does it cost for these services? Or is that still a big question mark as well? That's a big question mark. I mean, really wasn't determined even up until, you know, we got the notice this week about it. There were still a lot of questions about how would it be provided? Would it be sort of a free service with a phone, at least for certain aspects and maybe upside?

Would it be packaged together with a number of free messages? Of course, no one knows about future services where you can do more in your phone than messaging and basic connectivity going beyond what you see, say, from Apple or what we had offered or would be offering here. So it's really still a lot of question about that. And, you know, I mean, the good news about us is we have a network up there. It's very young network. It's very powerful. It's programmable, et cetera. So it was more of an incremental capability to us. There wasn't a lot of investment necessarily to this date. There are people who are talking, trying to raise money to build a whole network to just do this service directly.

And you've got to really question what the value of that is, if it's really worth the dramatic investment that would be required for that, as it's been really difficult to work out these business models. The Apple partnership with Global Star. I mean, I realize that that that Apple devices are concerned for what could be broader connectivity that involves other players like an Iridium in the future? Well, I can't speak to Apple too much. I mean, it looks like it's a pretty significant relationship in terms of the investment that they've made. I would love to work directly with Apple as well. And certainly now with this deal this week, I mean, now we can, and we can work with them where

we were precluded from doing that. And so we'll see where that goes, but hard to tell really where that is right now. I imagine they have a vision, certainly have a lot of respect for Apple and what they have done. And usually what they do is with a lot of focus on the user experience. So I expect that they'll continue to implement that and implement more capabilities on iPhones and other Apple products in the future. And I think the rest of the industry needs to take note of that and do the same. And, uh, and we're certainly ready to help those, uh, those companies do that. Any final thoughts or messages that you want to, um, put out there from Iridium before we wrap this up? No, as, as we've talked before, I mean, we were a growth company that's generating a lot of free cashflow. We have a lot of growth vectors in our market.

I think a lot of people were focusing on this one almost exclusively. And that's obviously, you can see that in the last year, but we still have a lot of opportunities and we're really excited about the future. So kind of a disappointment this week that this particular relationship fell apart, if you will. But really, we see a lot of opportunity in the future, both in this and many other areas of connecting satellites to people and things on the Earth. Matt Desch of Iridium, great to speak with you. Thank you so much for joining me again. Great talking to you, Morgan. Thank 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.