Barriers to entry are drastically underestimated

In early August, SpaceX, Elon Musk’s aerospace company, submitted an application to the FCC (Federal Communications Commission) to relax the global power limits for transmissions in low Earth orbit by operators such as SpaceX itself. This refers to the range of up to 2,000 kilometers above the Earth’s surface, which is used for communications satellites, for example.

As the analysts at Scotiabank recently reported, European telecommunications companies have spoken out against SpaceX’s application. 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 provider of DTC (Direct-To-Cell) satellite communications for some time and rate AST as “Sector Outperform”. Scotiabank sees the target price for AST shares at USD 45.90.

Direct To Cell satellites would allow global coverage and cooperation across borders would prove to be particularly relevant, as telecommunications companies from numerous countries operating on different frequencies would want to benefit from this new technology, the analysts continued. The question now is what would happen if the U.S., via the FCC, were to unilaterally revoke the limits that have been in force worldwide for decades. What would prevent other powers, such as China in particular, from doing the same, asks Scotiabank.

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 SpaceX’s request to relax out-of-band emission (OOBE) restrictions.

Potentially huge advantage for AST SpaceMobile

According to the Scotiabank analysts, it would be a huge advantage for AST SpaceMobile if the FCC did not relax the existing rules. The company would then not only be the first licensed SCS player with cellular broadband capacity, but also the only one, according to the experts. This would give AST a valuable pioneering advantage, which could also have implications in terms of mergers and acquisitions, they said.

It would also have a significant impact on SpaceX if the FCC were to uphold the existing regulations, Scotiabank explains further. Among other things, the company would then have to decide whether to redesign its DTC satellites from scratch, although there would be a risk of infringing AST patents. Scotiabank believes that the barriers to entry into this nascent industry are drastically underestimated from a technical, regulatory and patent perspective. The analysts therefore recommend buying the shares of AST SpaceMobil (NASDAQ: ASTS, WKN: A3CL8W) on weakness and see a target price of USD 45.90.

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