AST Spacemobile

Why the world's first space-based cellular network could become the next great telecommunications compounder

The only technology that works directly from your phone, wherever you are. Without and extra dish like Starlink. Vodafone proved it works in Jan 2025 on a live call. While AST SpaceMobile (ASTS) doesn't fit our strict "compounder" mold of established businesses with high ROIC and predictable cash flows, it represents something potentially more exciting: an emerging compounder positioned at the intersection of two massive, underserved markets.

The Trillion-Dollar Problem: 90% of Earth Has No Coverage

Despite living in our hyper-connected age, the reality is stark: 90% of the Earth's surface has no cellular coverage whatsoever. Among 8.2 billion people globally, over 3.4 billion cannot access cellular broadband, while 5.8 billion unique subscribers regularly move in and out of coverage areas.

This isn't just a developing world problem. Even in covered areas across developed markets, millions of dead zones and gray zones persist. AST SpaceMobile has identified a massive market opportunity: providing uninterrupted broadband connectivity, everywhere.

The Vision: Space-Based Cellular That Just Works

AST's breakthrough approach differs fundamentally from existing satellite internet services. Instead of requiring special equipment or outdoor positioning, AST's BlueBird satellites create virtual cell towers in space that work directly with existing smartphones. No new devices, no behavior changes—just expanded coverage through your current mobile carrier.

The technical achievement here cannot be overstated. These satellites, measuring 700 square feet each, are the largest commercial communications arrays ever launched into low Earth orbit. Each BlueBird essentially acts as a floating cell tower 320-450 miles above Earth, seamlessly integrating with terrestrial networks.

The Vodafone Validation: A Strategic Masterstroke

Perhaps the most compelling validation of AST's technology came from an unexpected source: Vodafone's expanded 10-year partnership and European joint venture. This wasn't just another MOU—Vodafone committed to creating a "jointly-owned European satellite service business" with AST.

Why is this significant? Vodafone operates in some of the world's most sophisticated telecom markets. Their decision to deepen their relationship with AST—preserving AST's economics while solving European sovereignty concerns—represents a massive endorsement from one of the industry's most experienced operators.

Even more telling was Verizon's conversion from skeptic to strategic partner. Historically vocal about their doubts regarding AST's capabilities, Verizon's $100 million commitment and partnership effectively doubled AST's U.S. addressable market while providing crucial capital and credibility.

The Compounder Framework: Four Revenue Streams

What transforms AST from a promising space venture into a potential compounder? The answer lies in their evolving business model, which projects four distinct revenue streams by decade's end:

1. Commercial Wholesale Revenue

AST's 50/50 revenue split with mobile network operators creates a scalable, high-margin business. With preliminary agreements covering 2.8 billion unique subscribers across 48+ operators, the potential is enormous. As these satellites provide continuous coverage, monthly recurring revenue from each subscriber should compound predictably.

2. Government Contracts

Six U.S. government contract awards totaling over $60 million demonstrate AST's dual-use capabilities. Government revenue provides stability and validates the technology's strategic importance—exactly the type of diversified revenue base quality compounders possess.

3. Manufacturing and Licensing

AST's proprietary satellite manufacturing capabilities in Texas (185,000 square feet across two facilities) represent valuable intellectual property. Their custom ASIC chips and internally developed software could generate licensing revenue as the space economy expands.

4. Spectrum Assets

The recent Ligado partnership provides AST with long-term access to 45 MHz of valuable mid-band spectrum in the U.S. and Canada. As spectrum becomes increasingly scarce, these assets could appreciate significantly while enhancing service quality.

The Manufacturing Ramp: Scaling Like Software

AST's production capabilities tell the story of an emerging compounder. Currently producing two satellites monthly (24 annually), they plan to scale to six per month by end-2025 through automation—a 3x increase representing true operational leverage.

With 53 additional BlueBirds already in production and contracts secured for approximately 60 satellite launches during 2025-2026, AST demonstrates the kind of execution visibility that quality investors prize.

The Path to Profitability: Clear Milestones

AST's management has provided specific profitability guidance:

• Operating cash flow breakeven: 25 satellites (intermittent service)

• Continuous U.S./Europe/Japan coverage: 45-60 satellites by end-2026

• Full constellation: 248 satellites over five years

These aren't vague promises but engineering-driven milestones based on coverage physics and demonstrated manufacturing capabilities.

Risk-Adjusted Returns: The Asymmetric Bet

Space ventures inherently carry execution risk, but AST's risk profile has fundamentally improved. With $840 million in cash and strategic backing from AT&T, Google, Verizon, and Vodafone, the company has sufficient runway to execute its near-term plan.

More importantly, the downside protection has strengthened considerably. Even in adverse scenarios, AST's intellectual property, patents, manufacturing insights, and spectrum assets would likely interest strategic acquirers—potentially worth billions to companies seeking space-based capabilities.

The Network Effects Opportunity

True compounders often benefit from network effects, and AST's business model has this potential in spades. As more satellites launch and coverage improves, the service becomes more valuable to both carriers and subscribers. This should drive higher adoption rates, justifying additional satellite investments and creating a virtuous cycle of expanding coverage and growing revenues.

Additionally, AST's wholesale model leverages existing carrier relationships and billing systems, accelerating adoption compared to direct-to-consumer approaches requiring entirely new customer acquisition.

One question I got a lot in the Sprint Club is: How can it compete with Starlink, which has already thousands of satellites up and ready?


It's Not About Satellite Count - It's About Physics and Market Position

1. Fundamentally Different Technologies

Each AST satellite has around 100-times the bandwidth/capacity of a Starlink D2C craft. This is crucial because:

• AST's BlueBirds: 700 square feet phased arrays designed specifically for cellular frequencies

• Starlink D2C satellites: Much smaller arrays retrofitted for direct-to-cell as a secondary function

There is a concept called the "link budget" - Starlink's satellites are simply too small for direct to cellular. The physics of radio transmission favor larger antennas for cellular service.

2. Service Capability Gap

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.

Meanwhile, AST SpaceMobile's most powerful proof was the first smartphone-to-satellite phone call, made in April on a Samsung device over the AT&T network - an extraordinary accomplishment that eclipses emergency text messaging support.

3. Go-to-Market Advantage: Wholesale vs. Direct

This is where AST's strategy is brilliant:

AST SpaceMobile has a decided edge over Starlink in driving scale and adoption; the wholesaler approach will allow it to serve a large swath of operators to monetize services.

AST's Model:

• Partners with 48+ existing carriers serving 2.8B subscribers

• Leverages existing billing, customer service, spectrum licenses

• 50/50 revenue split with carriers

Starlink's Model:

• Direct-to-consumer for internet service

• Limited D2C partnerships (T-Mobile, Rogers, etc.)

• Must build customer acquisition from scratch

4. Carrier Partnerships Trump Satellite Count

Starlink has deals in place with seven cellular operators, while AST has links in place with more than 40 including giants such as Verizon and Vodafone.

The Verizon endorsement is particularly telling - Verizon had historically been a vocal skeptic of AST's capabilities before becoming a strategic partner.

5. The "Tortoise and Hare" Dynamic

This could be a true 'the tortoise and the hare' scenario, with Starlink 'winning' this first lap of the race but being rapidly overtaken by AST.

Why? Because:

• Starlink launched fast but with limited capabilities (text-only initially)

• AST is launching slower but with full broadband from day one

• AST's manufacturing is ramping: From 2 satellites/month to 6/month by end-2025

6. Vertical Integration vs. Focused Specialization

SpaceX's Challenge:

• Starlink D2C is a side project to their main internet business

• Must balance resources across rockets, Starship, internet service, and D2C

• SpaceX accuses ASTS of being a "meme-stock" whose investors continue "their scorched-Earth campaign to hamstring competing direct-to-cellular operations" - suggesting they view AST as a real threat

AST's Focus:

• 100% dedicated to direct-to-cellular

• Purpose-built satellites optimized for cellular service

• Deep partnerships with wireless ecosystem

7. Regulatory and Interference Advantages

AT&T's technical analysis shows that SpaceX's proposal would cause an 18 percent average reduction in network downlink throughput, while Verizon argued that Starlink "would subject incumbent, primary terrestrial licensee operations in adjacent bands to harmful interference".

AST benefits from working with carriers rather than potentially interfering with them.

The Bottom Line: Different Markets, Different Strategies

AST doesn't need to "beat" Starlink in satellite count. They need to:

1. Deliver superior cellular service (which larger satellites enable)

2. Scale through existing carrier relationships (40+ vs. 7 for Starlink)

3. Focus on mobile broadband rather than spreading across multiple markets

AST SpaceMobile's go-to-market strategy, which taps into existing terrestrial cellular infrastructure and an install base of millions of mobile devices, is compelling, in contrast with Starlink's plan to provide and monetize fixed access services on a smaller scale.

The race isn't about who launches the most satellites fastest - it's about who builds the most valuable cellular service. AST's focused approach, superior per-satellite capability, and carrier partnerships position them well to win the cellular market even while Starlink dominates satellite internet.

Deutsche Bank's Revenue and Margin Assumptions for ASTS

Deutsche Bank's projections showing SpaceMobile revenue reaching $2.786 billion by 2028 with 91% EBITDA margins . Based on several foundational assumptions:

Market Access & Partnerships:

• ASTS has agreements with over 40+ mobile network operators globally representing 2.8+ billion subscribers including major carriers like AT&T, Verizon, Vodafone, and Rakuten Mobile

• Revenue sharing agreements are structured as 50/50 splits with mobile network operators

• The company expects $50-75 million in revenue in the second half of 2025, marking the transition to commercialization

Technical Validation:

• Successful demonstration of two-way video calls with unmodified smartphones across multiple carriers

• Download speeds of up to 21 Mbps achieved with prototype satellites, with Block 2 satellites targeting up to 120 Mbps

  Infrastructure Scale:

• Block 2 satellites will feature 2,400 square foot communications arrays delivering 10x the bandwidth capacity of current satellites

• Plans to deploy ~60 Block 2 satellites during 2025-2026 for 100% U.S. coverage Critical Assessment Using Valuation Principles:

Applying the Tim Koller framework as we usually do, Deutsche Bank's projections raise several concerns:

1. Return on Invested Capital (ROIC) Analysis: The projected 91% EBITDA margins by 2028 suggest extraordinarily high returns, but this requires careful scrutiny. Individual satellites cost approximately $16 million each, and with ~60 Block 2 satellites planned, that's nearly $1 billion in satellite infrastructure alone, plus launch costs and ground infrastructure.

2. Revenue Growth Sustainability: The jump from minimal 2025 revenue to $2.8 billion by 2028 represents astronomical growth rates that would require:

• Rapid satellite deployment without technical failures

• Successful regulatory approvals across multiple jurisdictions

• Massive subscriber adoption rates

• Consistent 50/50 revenue splits with carrier partners

3. Execution Risk vs. Projections: ASTS faces significant execution risks:

• Space deployment risks where "unsuccessful deployment could be catastrophic for the company"

• Current operating expenses of $66.6 million per quarter with minimal revenue

• Heavy capital requirements for constellation deployment

Bottom Line:

Deutsche Bank's projections appear based on a "blue sky" scenario where ASTS executes flawlessly across technology, regulatory, and commercial dimensions. While the partnerships and technical demonstrations provide validation, the revenue ramp and margin assumptions seem overly optimistic given:

1. The capital-intensive nature requiring massive upfront investment

2. Execution risks inherent in space-based infrastructure

3. Competition from established players like Starlink

4. Regulatory hurdles across global markets

The 91% EBITDA margins by 2028 particularly stretch credibility, as they assume minimal incremental operating costs despite massive infrastructure scaling. A more conservative analysis would factor in higher operational complexity, competitive pricing pressure, and normal business cycle variations that rarely yield such consistent high margins.

For quality investors focused on sustainable compounding, ASTS represents more of a risky bet on successful execution rather than a proven compounder with durable competitive advantages.

Conclusion: The Emerging Compounder Thesis

AST SpaceMobile represents a rare opportunity: a company transitioning from R&D to manufacturing and commercialization with clear pathways to multiple revenue streams, strong strategic partnerships, and massive addressable markets.

While it doesn't yet exhibit the predictable cash flows of traditional compounders, AST possesses the key ingredients for long-term wealth creation:

• Large, underserved market (billions without broadband access)

• Differentiated technology (space-based cellular for existing phones)

• Strategic partnerships (validated by sophisticated telecom operators)

• Scalable business model (50/50 revenue splits with carriers)

• Multiple expansion opportunities (commercial, government, manufacturing, licensing)

For investors willing to embrace the execution risk inherent in space ventures, AST SpaceMobile offers the potential for exceptional returns as an emerging compounder positioned to connect the unconnected billions—one satellite at a time.

As we stand on the cusp of a new communication revolution, AST SpaceMobile isn't just launching satellites; they're potentially launching the next telecommunications compounder. Access my complete watchlist in our community.

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