AST SpaceMobile.
https://ast-science.com/spacemobile/
The Black Swan of Low Earth Orbit satellite communication constellations. Why is it so different?
TL/DR AST SpaceMobile constellation will boast the largest ever deployed area of antenna in space. Powerful enough to do what no one else does: Connect directly to smartphones. Price Target: 45 USD per share. 3.8 x current share price.
I am not a financial advisor. This is analysis, not financial advice.
Background. The Communication Services Sector, CSS, Telecommunications addressable market and stepwise evolution of telecom sector.
CSS sector in the S&P 500
Alphabet (Google) and Facebook make up half of the S&P 500 CSS. Telecommunications companies is one fifth (21%) of sector, and about 2% of the S&P 500 total value. Internet infrastructure is not part of CSS, it is part of Information Technology sector.
The Total (global) telecom addressable market in 2021 is 1,000 Bn USD. Growing at CAGR 40% annually. This means the entire Telecom sector is by definition in hypergrowth. A company just maintaining its market share is, thereby, also in hypergrowth. This is largely driven by 5g rollout. And fueled by new technological concepts and evolvong standards.
Mainstream consumer telecom started as wire connected telegraphs, then phones, evolved into cellphones and terrestrial towers further subdivided into 2g, 3g, 4g LTE and now 5g. Research and development has started for another leap: Connecting to satellites.
🦅 Incorporated in 3GPP release 16 and 17, 5g standards. For Example Qualcomm x65 release 16 chip, manufactured by Samsung, and in cellphones from early 2022 is engineered to improve its satellite connectivity. Regular cellphones has already started adapting for AST type constellations.
🦢🦢🦢🦢🦢🦢🦢🦅 Low Earth Orbit Satellite constellations. A whole lot of swans.
There are a lot of Low Earth Orbit communications Constellations planned and operational.
How numerous some leading LEO constellations are planned to become. (correct for AST is 336 sats).
🦅 SpaceMobile constellation. Bigger antenna than any other.
Ellis Island. Originally only 3.5 acres in size, today Ellis Island covers nearly 27.5 acres. Or 111.000 square meters. This is the size of the total phased array antenna that AST SpaceMobile constellation will deploy when it reaches 336 satellites.
🦅 An AST satellite will be aprox 17.8 by 20 meters and flat. It features approx 331 square meters of phased array antenna. For a total of 111,216 square meters. And like Ellis Island SpaceMobile will grow in phases. And the real beauty lies not here but in the land side of the Network. The use of Altiostar virtualisation and using the internet for cellular connectivity. AST is bent pipe architechture keeping the complex stuff down on earth. No complex routing in space.
🦢🦢 For comparison Starlink satellites has 4 phased array panels approximately .65 x 0.65 meters in size each or 1.7 square meters total per satellite. That is a total of 71,400 square meters for the 42,000 planned Starlink constellation and 20,400 square meters for the constellation under current application. So Starlink is smaller in antenna size, more numerous, and more complex with routing and packeting done on satellite up in Space.
Low Earth Orbit, LEO, is satellites close to earth. Typically they are small with narrow Field of View, FoV / footprint. And use inter satellite links, ISL. See the section.
🦢🦢 We see the most numerous constellations (Starlink, US, European and chinese clones) are dominant. These white swans are competitors and share a few common traits: Small satellites, narrow field of view, intersatellite links, Ku-Ka band, and most importantly: They require a proprietary handset or fixed user terminal to achieve broadband speeds.
🦅 AST SpaceMobile communicates on cellular bands of terrestrial partners, a much lower frequency, compared to Starlink / Kuiper. AST has a very wide Field of View, not narrow as the others, which allow much higher share usable capacity as they will not be starring narrowly down on just deserts and oceans. AST does not use multiple inter satellite links like Iridium, instead it beams the data straight down to terrestrial gateways. This increases capacity and reduces latency.
VSAT, very small antenna aperture.
🦢🦢 The VSAT terminal cost is subject to economy of scale. For example the once 1000$ Starlink phased array terminal is now 499$ and projected to reach 200$. To this cost comes costs of distribution and mounting.
🦅 AST SpaceMobile communicates with standard cellphones and tablets already in peoples pockets at a Customer Acquisition Cost of zero. For fixed home internet an off the shelf 5g dongle will do. Making it highly competitive on developing markets and ad hoc / low throughput use cases globally.
Mobile monthly revenue per user on different markets.
🦢🦢 The customer acquisition cost, CAC, that subventions of VSATs would incur is still prohibitively costly on developing world markets compared to the Lifetime Value, LTV. Compare a future 100 USD initial VSAT obstacle to a revenue in Africa of 3.4 USD per month = 40.8 USD per year. These terminals also require manufacturing.
🦅 Communication satellites are getting higher throughput, and thereby lower Capital expenditures per bit transferred. AST takes this to extremes.
CapEx per Gbps. I have added numbers from Barclays bank AST coverage, to show AST SpaceMobile numbers. 1,200 Gbps and $ 10-12 Mn cost per sat. Link to Barclays report: https://pdfhost.io/v/C0G~b~5c3_Barclays_AST_SpaceMobile_Researchpdf
🦢🦢 CapEx per Gbps is coming down on the space segment as shown above. Starlink will mass produce its satellites and bring down costs to .5 Mn USD per small satellite (0.29 Mn USD per square meter phased array antenna deployed).
🦅 SpaceMobile is an extreme as it will mass produce its satellites and bring down costs per huge satellite to 10-12 Mn USD (0.036 Mn USD per square meter antenna deployed). This sharing of the expensive central control module along with wide FoV is the key to accomplish outstanding CapEx/ Gbps metric.
Signal Strength.
🦢🦢 Like previously mentioned other constellations has proprietary terminals in both ends to achieve enough signal strength and broadband speeds. This means they are either fixed and/or has prohibitively high user terminal / Customer acquisition costs. They use Ku band that needs free line of sight.
🦅 SpaceMobile is connecting to standard cellular phones. By its application to FCC we can see what the signal strength will be like. AST use cellular band which will penetrate inside buildings and through foliage/canopies.
From AST application. The cellular spectrum fronthaul tech specs.
🦅 Maximum Power Flux Density (upper table) of transmitting Beams 5/6 (same for both polarizations) in the 1805-2200 MHz (cellular fronthaul) range is -96.6 dBW/m2 or in other format 2.19e-10 W from a single midband beam at ground level. That is 2.19e-7 mW. -110 dB is virtually no signal (dead zone) the 13.4 dB difference is since it is a log scale 22 times the power of a lost signal level.
Signal strength and number of bars. From a research paper.
🦅 By matching the chart above the signal strength of the AST application is the equivalent of 4 bars on a cellphone ( there's no real standard on how companies can represent signal bars). So if AST SpaceMobile constellation delivers what AST managment applications show then it will mean medium/good download signal strength. As far as I am able to interpret these tech specs. This high signal strength is accomplished by using phased arrays and beam forming, highly directive antennas. If we were to compare radiowaves to visible light, then AST uses lasers where others use flashlights, so to speak. These narrow beams make for smaller cells, not only resulting in higher signal strength but also more bandwidth per user.
The Businessmodel
🦢🦢 Most other LEO constellations integrate vertically, it is because they have their own standard. They build the entire network including user terminals and own their spectrum. This is expensive, making their service exclusive. They fight ove Ku Ka bands.
🦅 AST SpaceMobile use extreme throughput Q and V bands in their backhaul that there is little competition for and they use shared spectrum from terrestrial partners (currently partners with 1.5 Bn customers are under 50-50 revenue share agreements MOUs) at no spectrum acquisition cost for AST. Terrestrial part of network will use Altiostar/ Rakuten virtualisation / AI software to slice exisiting terrestrial infrastructure and the internet to transfer traffic optimizing latency and speed while minimizing costs. Terrestrial sites will be built and maintained by partners Vodafone group and American Towers, all world leaders in their respective field, incurring no terrestrial CapEx for AST SpaceMobile.
🦅 Whenever a partner subscriber goes out of tower coverage they get an SMS so they can connect to AST SpaceMobile instead. Customer Aquisition thus automated, all digital, and requiring no extra end user equipment.
Present and future communication satellites in south east Asia, comparison. I added AST and Starlink. Note that AST has no "join the club" one time or monthly fee. Just 2$ per GB used. No monthly cost and no starting / VSAT cost makes for easy entry.
The only pure play
🦢🦢 Other constellations performing at broadband speeds, like Starlink and Amazon Kuiper are not available to invest in directly. They are part of bigger enterprises or not listed. There are companies like Iridium and Globalstar that are LEO constellations, but their latency, speed, and user costs is nowhere near competitive.
🦅 AST SpaceMobile does have a 51% owned subsidiary with 90 missions flown aiming at 30% of the US nanosat market, it is called NanoAvionics. But apart from that it is a pure play for investors seeking to invest in Low Earth Orbit connectivity.
Price Targets
🦢🦢 No LEO constellation ever became cash flow positive without first becoming chapter 11, bankruptcy. That is how CapEx intensive the industry is, and how few customers they get by using proprietary hardware. Starlink expects to go cash flow positive somewhere beyond 2030.
🦅 AST SpaceMobile has coverage from DB and Barclays with price targets of 35 and 29 respectively for an 32 USD / share average. Todays price is 11.7 USD per share. An upcoming catalyst, launch of Bluewalker 3 with Space-x in march 2022, will be pivotal for share price.
🦅 AST SpaceMobile is different in a good way, mutualistic/synergetic business model that shys away from CapEX by massproduction / economy of scale, using the reduced launch costs of Space-x, leasing terrestrial gateways from terrestrial pros, and most importantly using already paid for spectrum of terrestrial partners maximizing the use of the scarce expensive commodity of cellular spectrum in a 50-50 win-win model. By beeing different in a good way we can put some trust in company FCF projections and do DCF / NPV calculation.
DCF / Net Present Value Sensitivity Analysis. By u/Cryptographer
🦅 AST SpaceMobile investor presentation projects revenues up until 2030. And will become Cash Flow Positive upon launch of Equatorial in 2024. Using a percentage of the positive cash flow years (column) and an discount rate of your choice (row) the above table allows you to arrive at a fair current market capital. Using just 40% of the future projected positive cash flows (as a proxy for 60% failure risk) and a discount rate of 12% we arrive at 8.264 Bn market cap. Divided with 182 Mn shares that is 45 USD per share. When doing this we put zero value to subsidiary Nanoavionics a cash flow positive Nanosat provider growing yoy 300%. But beware that AST has within it many hypergrowth criteria. It is likely to either fail and be lower, or be much much higher on success.
Final thought. The impact on society.
🦅 AST SpaceMobile global coverage directly to cellphones from satellite will revolutionize the world very much like cellular towers already has. Understanding these leaps of technology is easy in hindsight. But now they seem like a Black Swan. Something you have never seen. Most will react by denial at this stage, which explains the current price. The omnipresence of 5g coverage (that from 3GPP release 16 includes hardened positioning / fused LEO GNSS i.e a more secure more precise GPS) will revolutionize drones and remotely operated vehicles as they will be connected everywhere with low latency. The network will jump-start economic development in the third world and open up markets for other communication services sector companies as new customers gain access to cellular connections at broadband speeds.
References
