AST SpaceMobile: Transforming How the World Connects

Eliminating Connectivity Gaps in Broadband

AST’s vision is to provide mobile broadband wireless coverage to existing cell phones in partnership with today’s global, mobile network operators (MNOs). Supplemental coverage from space through AST’s satellites would be a breakthrough for the wireless and satellite industries, allowing satellite delivered mobile wireless service to expand beyond niche applications we see today to broad consumer adoption. 

Addressable Market

Even in 2024, billions of people around the world have no or limited mobile internet access. Among a global population of 8.1 billion, 5.6 billion unique cellular subscribers move in and out of basic and broadband wireless coverage daily while more than 3.4 billion people are unable to access cellular broadband. Of these, 3 billion have a usage gap and 400 million have no cell coverage. 

In fact, ~90% of the Earth’s surface has no cell coverage whatsoever.² Even in covered areas, there are millions of dead zones and grey zones in existing terrestrial networks. AST plans to eliminate these gaps by providing an overlay or supplemental broadband service mobile subscribers can opt into through their MNO’s domestic service plans—resulting in broadband coverage for the unconnected billions. 

AST’s Vision and Growing List of Partners

AST plans to eliminate connectivity gaps by launching a constellation of 248 satellites into low earth orbit—between 320-450 miles above the earth—over the next five years. Seven years in development, these BlueBird satellites use a novel design, internally developed software and custom hardware that is then spliced into the wireless operators’ “core” network through a partnership with Nokia. This technique allows the cell phone to see a virtual cell tower broadcasting on the carriers’ existing terrestrial spectrum.

A Growing List of Wireless Carrier Partners 

AST plans to provide broadband voice, data, and video service on a wholesale basis to MNOs. In exchange for a 50/50 revenue split, the MNOs promote the service to their subscribers, manage billing, customer service, and network integration and benefit from incremental revenue and a more reliable network to reduce customer churn.

 AST’s service should also help meet government coverage requirements in remote areas where cell towers are uneconomic to build. For AST, this wholesale model should simplify its business plan, accelerate user adoption, and facilitate a scalable, high margin business.

Currently AST has preliminary agreements and/or memorandums of understanding with more than 48 mobile network operators with over 2.8 billion unique subscribers. AST also has strategic commitments and/or investments in the form of convertible debt and prepaid revenue from AT&T, Google, Verizon, and Vodafone.

AT&T is the first MNO to complete a definitive commercial agreement with AST and we expect several additional operators to sign on in the coming months.³

Additionally, AST’s strategic partnership with Verizon includes a $100 million combined commitment. The emergence of Verizon as a partner in 2024 effectively doubled the addressable market for AST in the U.S.—the most lucrative wireless market in the world—while advancing AST’s capital plan. Further, it is a major endorsement of AST’s technology, given Verizon had historically been a vocal skeptic of AST’s capabilities.

The Successful Launch of BlueBird 1-5 Satellites

In early September, AST launched its first five commercial BlueBird satellites into space atop a SpaceX Falcon 9 rocket. These satellites were built on the success of its in-orbit BlueWalker 3 test satellite. The five new BlueBirds are expected to be able to provide non-continuous coverage in the U.S. by powering thousands of virtual cell sites using FCC defined premium low-band spectrum. Each BlueBird has a planned 10-fold increase in processing bandwidth over the BW3 test satellite.

These beams or virtual cell sites on BlueBirds 1-5 are designed to support a capacity of up to 40 megahertz of spectrum, enabling peak data transmission speeds of up to 120 Megabits/second/beam anywhere across the virtual cell sites.

Each Bluebird satellite has a massive, phased array antenna measuring ~700 square feet. Its market leading size allows it to beam form effectively (without producing harmful interference) and connect directly with cell phones via 3GPP-standard frequencies though existing MNOs core systems and spectrum. We expect AST to unfurl the satellites’ antenna arrays several weeks to a month after launch. 

All BlueBird satellites will have dual capabilities; they should enable supplemental coverage from space for global MNOs as well as support communications and other non-communications applications for the U.S. government.

Excellent Management

Supporting our view, we believe that AST founder, Chairman, and CEO, Abel Avellan, has assembled a first-class space and wireless technical team, paired with strong commercial and legal talent. In fact, we met with many of them again during the recent launch event for the five BlueBirds at Cape Canaveral in September 2024.

In addition, wireless heavyweights Vodafone, Samsung, and Rakuten are investors and/or board members. In 2024, Chris Sambar, Head of Network for AT&T, was appointed to AST’s board of directors.

Limited Competition

Starlink, a satellite internet constellation operated by Starlink Services, LLC, a wholly owned subsidiary of aerospace company SpaceX is best known for its satellite to home internet service. But two years ago, Starlink teamed with T-Mobile USA to develop and launch a potential new and well-funded direct-to-cell competitor to AST. However, Starlink’s planned voice and data service is now limited to simple texting (not broadband or internet) and requires users to be outdoors with a direct view of the sky. Recently Starlink’s direct-to-cell program has come under increased scrutiny from the FCC and global MNOs due to concerns over harmful interference its satellites may cause to wireless services in adjacent spectrum bands. It is not clear that these issues can be resolved using Starlink’s existing technology, posing a potential significant setback for AST’s most direct competitor.

Summary

AST is a “special situation” investment for the Hennessy Focus Fund, as it does not meet the Fund’s typical compounder model of historically producing a sustained mid-teens or higher rate of earnings growth. However, we believe it presents a very compelling “emerging compounder” profile with a favorable risk-return profile at today’s price.

There are still many technical, regulatory, and business hurdles to making AST’s vision a reality. However, our research, including conversations with industry consultants, scientists, competitors, management, and a strategic investor, have convinced us that the company has already made substantial progress—including successful demonstrations of multiple key proprietary technical capabilities—and that remaining hurdles are challenging, but likely surmountable.

We are on the cusp of a new communication revolution with decades of potential growth in front of it. We will be watching for the following catalysts over the next three to six months: 

Successful unfurling of BlueBirds 1-5, execution of the AT&T/Verizon spectrum joint venture, additional prefunded definitive agreements with MNOs, FCC approval of commercial operations in the U.S., potential FirstNet Funding/subscriptions for first responders, a 2025/26 launch cadence for BlueBirds 6-22 and beyond, U.S. government announcements/milestone payments, Starlink’s potential interference issues and the timing of future capital raising activities to support the near-term growth of the constellation to 45-60 satellites.

AST is attempting to solve a huge, global need. If successful and using modest assumptions about user adoption and pricing, the company could be worth significantly more in five- or ten years’ time. 

But keep in mind that investing in space is hard and space ventures face many challenges, so the risk of capital loss is real. We initially sized the position with these risks in mind. But we no longer believe that even in the direst of circumstances that the shares would be worthless. There are today substantial intangible assets, (IP, patents, and manufacturing insights) that would be worth billions to an acquirer.

The company has transitioned from a research and development (R&D) focused phase to a manufacturing and commercialization phase. 

By the end of the decade, we can envision four separate revenue streams: commercial, government, manufacturing, and licensing/royalty. This thinking is informed around our long history with wireless infrastructure and conversations with a network of contacts. We believe AST this is a nascent compounder with an attractive risk/reward profile.