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 2025, billions of people around the world have no or limited mobile internet access. Among a global population of 8.2 billion, 5.8 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 several additional operators are expected 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.

AST extended its partnership with Vodafone for another ten years and entered into a joint venture (JV) with Vodafone in Europe to create a “jointly-owned European satellite service business to serve MNOs in European markets.” This JV preserves AST’s economics, solves for European sovereignty issues, and could lead to additional midband spectrum opportunities.

On the government front, AST secured an additional contract with the U.S. Space Development Agency for $43mm of revenue to provide satellite services through a prime contractor. AST also signed a new contract with the Defense Innovation Unit for up to $20mm via a prime contractor. These represent its fifth and sixth U.S. government contract awards and reinforce communications and non-communications capabilities of the satellites.

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. In October, the company announced that it had successfully unfolded all BlueBirds from the compressed form and in November, the satellites were ready to become operational. This is a significant accomplishment as these satellites are the largest commercial communications arrays ever launched in low Earth orbit (each satellite measures about 700 square feet).⁴

While these five satellites will provide coverage for less than one hour per day, this is sufficient for some revenue generating government and commercial services. Further, these five begin the march toward the 45 to 60 satellites needed to provide continuous coverage of the continental United States, Europe, and Japan (and other key developed markets) at which point it is expected that AST will be able to offer a compelling value proposition for the consumer mass market.

The company targets continuous commercial service in the United States in late 2026. To achieve this ambitious goal, the company will need to build and launch another 40 to 55 satellites over the next 18 or so months. AST produces its satellites in two locations in Midland, Texas with a combined 185,000 square feet. The company appears to have the capability to produce two satellites per month now (24 per year), and has plans to ramp to six satellites per month by the end of 2025 via enhanced automation (72 per year). AST has been working on 53 additional BlueBirds over the last few months, so they already have some production momentum.

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.

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

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.

The last six months were transformational for AST SpaceMobile. AST fortified its balance sheet with a $460mm convertible senior note offering, and as part of this transaction, AT&T, Google, Verizon, and Vodafone converted their existing notes into class A shares. With about $840mm of cash at quarter end, AST accelerated its satellite manufacturing production and now anticipates orbital launches every one to two months on average during 2025 and 2026.

Additionally, AST began packaging its application-specific integrated circuit (ASIC) chips with the goal of rolling them into production in the early second half of 2025 and exercised contract options to secure launch services for approximately 60 satellites during 2025 and 2026. The company reiterated guidance it could achieve operating cash flow breakeven when AST provides intermittent service with 25 satellites. We believe the company should be nicely profitable with the launch of 60 B2BBs which should support continuous service in the U.S., Europe, and Japan by the end of 2026.

Further, in partnership with debt holders of the bankrupt Ligado, AST signed an agreement which will provide the company with long-term access to up to 45 MHz of lower mid-band spectrum in the U.S. and Canada which it can use in concert with its MNO partner’s spectrum holdings.

We are quite pleased with these developmental highlights and remain excited about the future. 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 challenging 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 worth substantially less than they are valued currently. 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.

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.