Entry Barriers Are Drastically Underestimated
At the beginning of August, SpaceX, Elon Musk’s space company, filed an application with the FCC (Federal Communications Commission) to loosen the globally applicable performance limits for transmissions in low Earth orbit from operators like SpaceX itself. This concerns the area up to 2,000 kilometers above the Earth’s surface, which is used, for example, for communication satellites.
As analysts at Scotiabank recently reported, European telecommunications companies have spoken out against this application from SpaceX. This, in turn, is positive for SpaceX competitor AST SpaceMobile (NASDAQ: ASTS, WKN: A3CL8W), according to the Canadian bank. The experts have been observing the DTC (Direct-To-Cell) satellite communication provider for some time and rate AST as “Sector Outperform”. Scotiabank sees the price target for AST shares at $45.90.
Direct To Cell satellites would allow global coverage, and cross-border collaboration will prove particularly relevant as telecommunications companies from numerous countries operating on different frequencies want to benefit from this new technology, the analysts continue. The question now is what would happen if the US, through the FCC, unilaterally terminates the limits that have been in place worldwide for decades. What would then stop other powers, particularly China, from doing the same? Scotiabank asks.
In light of this, leading European telecom companies including Vodafone, United Group, Telefonica, and Orange recently submitted a joint letter to the FCC, outlining their concerns regarding the relaxation of OOBE (out of band emission) limitations requested by SpaceX.
Potentially Enormous Advantage for AST SpaceMobile
According to Scotiabank analysts, it would be a huge advantage for AST SpaceMobile if the FCC does not relax the existing rules. Because then the company would not only be the first licensed SCS player with mobile broadband capabilities but also the only one, according to the experts. This would give AST a valuable first-mover advantage, which could also have implications for mergers and acquisitions, they said.
It would have significant implications for SpaceX if the FCC adheres to existing regulations, Scotiabank further explains. The company would then have to decide, among other things, whether to redesign its DTC satellites from the ground up, but with the risk of infringing AST’s patents. Scotiabank believes that the entry barriers to this emerging industry are drastically underestimated from technical, regulatory, and patent law perspectives. The analysts thus recommend buying shares of AST SpaceMobile (NASDAQ: ASTS, WKN: A3CL8W) on weakness and see the price target at $45.90.
