Did SpaceX Just Put AST SpaceMobile Out of Business?

[Elderberry]

The Motley Fool By Rich Smith - Sep 5, 2022

Key Points

•  America contains 500,000 square miles of cellphone "dead zones" in which your cellphone won't work -- not even to send a text.

•  T-Mobile US aims to change this by partnering with SpaceX to route some cellphone texts and calls via satellite.

•  But SpaceX's entry into the market puts several other businesses at risk.

There's one obvious victim of SpaceX's decision to begin providing cell service -- and several less-obvious victims.

Have you ever been driving cross country -- maybe on a family vacation -- and suddenly discovered your phone had no bars? The podcasts won't load. Spotify won't run. Your texts don't ever quite "send." And just to make you really nervous, "GPS signal not found."

You've entered a cellphone dead zone -- and sure, it will probably pass in a few minutes, and you'll be back in "civilization" again. But what happens, you wonder, if the car breaks down, and you're stuck here with no cell service with which to call for help?

Well, fear no more, because T-Mobile US (TMUS -1.35%) has an app for that -- or more precisely, a new partner that can give you cell-like service even when there's no cell service to be found.

It's good to have friends in high places -- like, really high

According to T-Mobile, "well over half a million square miles of the U.S." are effectively dead zones lacking any cell service whatsoever "from any provider." But as telecom company T-Mobile announced last week, it's partnering with space company SpaceX to offer cell-like service from space via SpaceX's Starlink broadband communication satellites. 

For no additional fee on top of T-Mobile's existing cell service -- and using their existing cellphones -- customers driving through cellphone dead zones should soon have the ability to send short text messages (and later, phone calls, and even later than that, perhaps more bandwidth-hungry data) via SpaceX's satellites, to put them back in touch with "civilization." And as T-Mobile emphasizes, this will be an alternative to paying "exorbitant rates to lug around a sat phone." 

What it means to investors

That last point poses a direct threat -- if perhaps not an immediate threat -- to the business models of dedicated satellite phone providers, including Viasat (VSAT -5.04%), Globalstar (GSAT 2.00%), and Iridium (IRDM -1.50%), even if investors don't really seem to have clued into this risk yet. So far, Viasat stock is only down 2.4% since SpaceX and T-Mobile announced their partnership, and Iridium stock is only down 1.5% -- while Globalstar stock is actually up 6.1%.

In the meantime, SpaceX's move into the satellite phone business threatens to smother in the cradle the business model of space cell service hopeful AST SpaceMobile (ASTS -4.20%). Shares of AST are already down 13.5% since SpaceX and T-Mobile made their announcement -- and this stock, in particular, may have even further to fall.

More: https://www.fool.com/investing/2022/09/05/did-spacex-just-put-ast-spacemobile-out-of-busines/