$ASTS : JV goes Varsity - Spectrum Talk

this article highlighted some type of new news. But there is a public process. Here, let me just pull it up. But it talks about the public process where as part of the FCC approval, that brain would have to basically fall through with what they said. So, brain went to the FCC and said, hey, by the spectrum, we want to be able to utilize satellite providers in order to deploy it so that we don't have to build an expensive threshold network. And that network is expensive because you have to hang, you have to go to tower companies like an American tower, Crown Castle, one of these guys, lease out a tower and then hang the radios on it to deploy your spectrum. And that's really expensive. And so the game changer with this FCC is that they are now allowing for spectrum to be deployed by satellite as the primary technology to deploy it. And so you can meet a build out requirement to, by you, you know, deploying the spectrum via satellite. And this is something that Charlie Irgin, go back in the day when he acquired a bunch of AWS 3 and AWS 4 spectrum, he had made a commitment to the FCC. I want to build a, a, a threshold broadband network. And as a result of making that commitment, he spent billions and billions of dollars to try to build out a competing network to AT&T Verizon, T-Mobile. And he failed in that endeavor, right? Because it was just really too expensive. And on top of that, he didn't really have that much low-band spectrum. I think he had 700 megahertz and in a few markets and I think another license. But he, he, he relied on AT&T, I think it was T-Mobile, as envy knows to provide him some level of coverage because he didn't have low-band spectrum. And so after billions of dollars of failing, that's when of course Echo Star, which, Echo Star eventually merged with Dish, got into trouble and then the FCC said, you guys have not met your build out of Herman, so you have to sell it or lose it. And so that's what ultimately happened. He was forced to sell it to your SpaceX. So anyway, going back to this article, it says here that you know, grain is asked interested party submit, preliminary offers by the first week of September. Some of the people said asking not to be identified because the discussions are private. And so grain hopes to reap about $6 billion from selling the licenses. One of the people said, one of the people, although the company's plan could also involve leasing capacity, it's also possible another bidder could emerge. So you have to ask yourself, like, why is this article leaking and who, and whose interest is it to leak something like this? And so this is kind of a classic, you know, ploy by bankers and sometimes attorneys, but usually it's bankers. So grains bankers, whoever's working on it, they leaked this to Bloomberg because they want to get the competitive tension up, right? So initially, and based off of what we, everything we saw from regulatory filings and, you know, not only from AST space mobile, but also from grain. I mean, AST is actually out there testing this spectrum. So it's a very public process. And then you've got these bankers from grain. And I'll give you another perspective of who it might be as well, but the bankers from grain are trying to like increase the competitive tension and basically tell AST indirectly through this article, hey, SpaceX is here. And so while we're negotiating this potential agreement, and let me just go through the day. So let's see, grain has to select a financial advisor by August 7th. And so clearly they've hired a financial advisor. That person is supposed to, or that firm is supposed to administer the satellite slash direct to device partner selection process. And on the same date, grain may must also formally initiate a competitive process to broadly solicit bids from prospective satellite operators. So it's now August 20th, so we're kind of middle that. And it sounds like the first round of interest is supposed to be submitted in the first week of September. And I'd say round of interest, right? Because it's not necessarily buying. There's other ways to potentially utilize the spectrum. And so the next date is November 5th, which is what this article refers to. grain must complete the competitive process and notify the FC of the outcome through the ECFS, which is the FCC filing system. So effectively, this deadline is set so that they have to select a direct to device slash satellite partner if they want to deploy a favorable D2D contract number seam. Because if grain does not utilize a spectrum partner, they have to then go build a terrestrial network, which is going to cost. If you think six billion is a lot, it's going to cost at least that to deploy the network terrestrial. So it's important to note the here that grain, there is a bit of chicken here, because if it's not going to find a satellite partner, but if they didn't, then they would be on the hook for several billion dollars in multi years of building out the spectrum. So they can, they can, you know, I'll part of my friends so they can fuck around for a bit to try to increase the competitive tension. But if they end up overplaying their hand, and if AST for example, and SpaceX don't play ball with these guys, then they could end up with a big shit sandwich, right? Because then they have to actually go build out the threshold network. And that would cost, you know, Charlie Irgin, I think he'd spent like eight billion. He couldn't even get there, right? And so if you like eight billion, you're going to love 10 billion, whatever the number is. And then by December 4th, the application. So once grains, like a partner, the parties together have to complete and a fully supported satellite application by December 4th, right? And so in that, it will, it needs to specify everything that they're going to do in order to meet these FCC specific directed device specific build out requirements, right? So that's the backdrop. And if you read this article, you know, it talks about, you know, there's one part, one person that was sourced to saying that that grain wants to potentially sell the spectrum and hopes to reap 6 billion. So they're putting out a number, right? So by the way, like when you are in these processes, all the parties sign confidential ID agreements, typically grain wouldn't be able to tell AST and they shouldn't, right? Their banger should say, oh, there's other parties involved, but you can't really disclose who they are in vice versa. But when you have these leaks, you're able to do it. And then you can, you know, you can claim ignorance. Be like, well, I don't know who leaked that, you know, but it's a way to kind of disclose information and get around legal restrictions, right? And so here, again, you know, they're saying, we're going to take preliminary offers by the first week of September. So, so that actually is not a public, you know, data point. It's actually the whole process is supposed to start on August 7th and it's supposed to, there's supposed to be a slatsal one by November 5th. So, so we know when the first round is, right? It's the first week of September based off of that. They'll give some feedback to whoever is kind of there. And then there might be another round or some final, you know, they enter to exclusivity with whoever puts forward the best offer. But here, it says, you know, they're throwing a, a hail, hail marrying number like, man, if someone pays $6 billion and they can have it, $6 billion or better. In an ideal world, if your grains advisors, you're like, oh man, I hope someone, I hope two people bid six and then we can get a bidding war and maybe it ends up at seven or eight, who knows, right? Someone might blow the brains out. But it also says, hey, we're not, we're not necessarily gonna sell the spectrum, we're gonna potentially lease it, which I think is the ultimate outcome of this. But, but you know, we can talk about it more. They, they also say it's possible, another bidder can emerge. Of course, of course they are, right? Because like, if you, you were selling your house and you've got two bidders, you know, if you have an aggressive real estate and you say, well, there's actually a third and fourth bidder here too and so you better put your best in final or put your best foot forward. And so that's typically, you know, what happens in these processes. But let's see here, I'm just gonna go see if there's anything else in this article. I mean, there's just a lot of background here. Okay, so as I said before, I think this article was probably leaked by Grains Advisors because they, they're trying to get AST to put their best foot forward. And my guess is if I was in Scott Shoes, and by the way, like we just hired this UBS vice chair as an strategic advisor, hmm, the timing fits, right? And so what I would offer, Grains, is I would offer them a similar deal as Lagata, right? Like I would offer them some cash upfront to basically, you know, lock in exclusivity with the spectrum and then it would be on a multi-year, you know, long-term lease and I would offer them some ups in the business, right? Like maybe you split, I don't know, just picking up the numbers. Like they get 30% of the revenues generated from it, right? Or 20% or whatever it is, right? And so in that regard, AST doesn't put much cash upfront. Grains also rides the risk, execution risk to degree, but because it's being deployed by satellite, you know, the buildup requirements, by the way, I think is you need to cover like 70% of 90% of the population within like three years. That should be very doable, right? And so, and the whole point again is for Grains, the most cost effective and efficient way to deploy the spectrum is to utilize the satellite player, right? So if Grains, let's say if they ever play their hand in AST and SpaceX aren't playing ball and whoever else, then Grains would be on the hook for multi-billion dollar buildup, terrestrial buildup, which is not fun, right? But here, you know, the Grains bankers, they leak this article, they're trying to get, you know, part of this could be to get AST to build up, even though the lawnmust just did everybody favor, and whether you believe them or not, he just said, no, this is absolutely why we're not involved. Which it could, when he says not true, it could be for parts of the article, parts of the article might not be true, or the entire article may not be true, right? So, you know, when he says not true, it could be, okay, we're not buying it, but we're definitely interested in using it. And if I was SpaceX, I would absolutely be all over this, right? And so let's look at it from each of the players' perspectives. So let's talk about SpaceX. First of all, if SpaceX wants to buy the spectrum, they will be able to buy it. They can pay the most, they have an acquisition currency, their stock is whether, you know, I mean, just, on any measure, it's a richly valued company, right? And so they can, they can issue stock, they can sell stock and raise cash, they can bid whatever they want, right? Cause it's a multi-trollion dollar company. And so if SpaceX wants to buy it, then they can buy it, right? And they're not going to have any regulatory issues in terms of antitrust. But the issue for SpaceX is that there's this pesky build-up requirement, which by the way, like the FCC, Brennan Car, he likes SpaceX. So if they don't get there in terms of coverage, you know, 70% of the 90% of the population in the first three years, they'll probably get a waiver and extend that. However, this commits SpaceX to a different platform, right? So it's not as if the V2 satellites can service this spectrum. They'll have to build another platform, call it V2L for low band, I guess. And it will have to have a much larger phased array. And they'll have to perfect the ability to, yeah, I mean, they'll change the architecture. They'll get there, right? It's SpaceX, they'll get there. But can they develop that satellite within a three-year timeframe and get it deployed and a full constellation up unclear, right? Because they're focused on, and this is one of the challenges for SpaceX is that they're focused on deploying the next generation starlink, fixed wireless satellites. They're going to deploy the V2 satellites for direct to cell. So sorry, V3 for fixed wireless, V2 for direct to cell. They're trying to do over-only data centers. And then you're going to add a fourth platform, which is the low band spectrum satellites, right? Which is what AST currently has in orbit now and is deploying. So that's another distraction, right? And that's more tonnage that you got to ship out to space. And eventually, though, I will say that this should be in their roadmap. Because if you're going to compete with wireless carriers, you need to have some low band spectrum, right? And so whether you do something around grain management, which might not be a good time for you because you have to meet buildout requirements, then you might look to a handful of other potential spectrum plays, right? But I think for SpaceX, you know, I think it's important to just say upfront, like if they want to buy it, they can buy it. Like there's no, they can out bid pretty much anybody, right? Now do they want to blow their brains out on this low band spectrum? Unclear, right? And it is a different strategy. And there is a, you know, by locking yourself into this spectrum, it also kind of plays your cards pretty early, meaning that if there was, so, you know, SpaceX has talked out at both sides of the mouth, where on the one hand, they've said, we want to work with them and knows. And we're, I think Brett Johnson in an interview with one of the banks he was saying, or it was more, no, as well as Fargo, their research report, he talked about how they, they feel very strongly that they can get an MVNO agreement. And part of the ploy to get an MVNO agreement is that there is a bit of carrot and stick.