09.08.25
Posted in AST SpaceMobile, Echostar, Globalstar, LightSquared, Operators, Regulatory, SpaceX, Spectrum, T-Mobile, Thuraya, Verizon, ViaSat at 5:47 am by timfarrar
My post last week on the potential scenarios for EchoStar assumed that the buyer of EchoStar’s spectrum would be a terrestrial player, because only using the spectrum terrestrially could produce a return that justified paying Charlie Ergen’s asking price. 12 months ago that was true when the rumors were that SpaceX was only willing to pay a few billion dollars for access to EchoStar’s AWS-4 spectrum.
With Deutsche Telekom apparently getting cold feet about buying spectrum for D2D, and Verizon not yet at the table, that meant the most likely scenario was for EchoStar to continue moving forward with its own constellation, in order to keep control of the whole AWS-4 block and significantly constrain Starlink’s D2D capacity in the US (while having the opportunity to monetize the spectrum in urban areas through leases to a wireless operator like Verizon).
But ROI has never been the primary determinant of SpaceX’s decisions, when the opportunity presents itself to dominate an industry and force competitors out. That’s why we are seeing aggressive actions from Starlink in the satellite broadband market, lowering prices for hardware and service in both the consumer and professional markets to make Amazon Kuiper’s entry harder (including a new unlimited maritime plan for merchant vessels at only $2500 per month, which will also undermine Viasat’s NexusWave).
And in this case, by spending $17B, SpaceX has not only persuaded EchoStar to give up its D2D plans but has now made it much harder for any competitor to move forward when they can’t possibly compete with SpaceX’s speed in bringing new satellites to market. That was evident in the article published by The Information in May, where Apple staff working on the D2D project with Globalstar expressed concerns that their bosses would cancel the effort and decide to partner with SpaceX instead. And we’ve seen more on that front in recent months, as Globalstar’s new satellites have been delayed, and Apple was apparently forced to support Starlink on the iPhone 13 in order to secure a new launch slot.
It shouldn’t be ignored that just like in fall 2022, the SpaceX announcement comes right before Apple’s own event tomorrow to announce its new iPhone. So while this might not be on the agenda tomorrow, decisions about the future of the Apple-Globalstar partnership and the new C-3 constellation will be on everyone’s minds. The cancellation of the EchoStar D2D constellation was already a major blow for MDA, but any decision by Apple to pull back from the C-3 constellation would be even more devastating.
SpaceX especially wants Apple to cooperate instead of pursuing the C-3 constellation because the H-block and AWS-4 spectrum, that SpaceX is now acquiring from EchoStar, is not supported by any current phones (EchoStar’s Band 66 and Band 70 used different frequency pairings). Thus support from device manufacturers will be needed to get the new capabilities enabled by this spectrum into consumers’ hands in the near term. Of course if Apple doesn’t come around, then there’s always the possibility that SpaceX will announce a “Starlink phone” as Apple executives worried about in the May article.
In recent years, Musk has also plotted the ultimate challenge to Apple, said a person with direct knowledge of his thinking: building his own phone to get around Apple’s gatekeeper position in the market. Musk has discussed Tesla building the phone and providing satellite connectivity through Starlink, the person said.
Musk hasn’t kept his openness to making a smartphone secret. He has publicly toyed with the idea on social media at times, but he has also made it clear he doesn’t want to deal with the headaches of such a monumental effort.
“The idea of making a phone makes me want to die,” Musk said at a Trump rally in Philadelphia last October. “If we have to make a phone, we will. But we will aspire not to make a phone.”
And as far as other competitors go, AST is already struggling with enormous delays, which are now even worse than the company indicated in mid August, after the FM1 satellite wasn’t ready to ship at the end of August as promised during AST’s Q2 results. And AST needs to raise over $400M in the next few weeks to make the $420M payment due to Viasat at the end of October. The one good piece of news for AST from this deal is that it very likely means EchoStar won’t retain its EU 2GHz license (though there will undoubtedly be litigation if it is cancelled), leaving AST/Vodafone in competition with SES/Lynk for what will presumably by a paired 10MHz license (assuming Viasat retains its own paired 15MHz license).
It’s also unclear what Viasat will do next, as the company hoped to secure financial backing from UAE-based Space42 to build its own LEO L-band network. While I don’t think a formal deal was likely to be announced next week in Paris, this announcement probably gives Space42 further pause about whether it makes sense to challenge Starlink in the D2D market, especially as the expectation was for Space42 and the UAE government to put up most of the funding.
Finally, I think we can now look to EchoStar to gradually wind down the rest of its operations and sell off its remaining spectrum. The remaining major block is AWS-3, which Verizon might pick up in the next few months, potentially at a discount to the $10B EchoStar paid, especially if Verizon takes on the AWS-3 reauction obligations. And then it would be reasonable to assume that DISH DBS would merge with DirecTV and Hughes could eventually be sold (perhaps to a private equity buyer?).
Permalink
08.31.25
Posted in AT&T, Echostar, Financials, Operators, Regulatory, SpaceX, Spectrum, T-Mobile, Verizon at 9:15 am by timfarrar
Last week, EchoStar and AT&T announced a landmark spectrum deal, under which EchoStar will sell all of its 3.45GHz and 600MHz spectrum holdings to AT&T for $22.65B. But many analysts think “this is just the first step and the process is not yet complete“, not least because EchoStar CEO Akhavan commented that “We continue to evaluate strategic opportunities for our remaining spectrum portfolio in partnership with the U.S. government and wireless industry participants”.
The big prize now is EchoStar’s collection of midband assets in the AWS-3, H-block and AWS-4 bands, which could collectively be valued at as much as $30B. Semafor suggested that a three-way deal between AT&T, T-Mobile and EchoStar had been discussed under which AT&T and T-Mobile “would have swapped some of their own spectrum holdings”, but later indicated that “T-Mobile’s ultimate owners, Deutsche Telekom, tapped the brakes”.
This has caused speculation to focus on Starlink and even Kuiper as potential buyers of these assets, but what many articles are getting wrong is the suggestion that this is because (as Semafor put it) Starlink “wants its own network to provide cell coverage, something that would disrupt the stranglehold that AT&T, Verizon, and T-Mobile have on the US market”.
That’s a complete misunderstanding of the Direct-to-Device (D2D) business, which (despite the nonsense promulgated by some AST SpaceMobile investors) is limited to much slower speeds and far less capacity than terrestrial networks. It’s a simple matter of physics that communicating from your smartphone to a satellite hundreds of miles up in space will be less efficient than communicating with a cell tower a mile or two away and that means D2D is not a true substitute for terrestrial cellular service.
The consequence of this lower throughput and capacity is that D2D can’t generate the same revenue from each MHz of spectrum in space as a terrestrial operator on the ground, and so D2D operators can’t afford to pay as much to acquire spectrum. That’s why we’ve seen increased interest in cheaper MSS spectrum, both from Apple investing in Globalstar and more recently AST SpaceMobile bidding for Ligado’s spectrum.
But EchoStar’s mooted $30B price tag is only achievable by buying this spectrum for use in a terrestrial network, which is why Starlink has been trying to persuade the FCC to award it some of EchoStar’s spectrum for free. If that doesn’t work out then Starlink needs T-Mobile to pay the vast majority (if not all) of the $30B that EchoStar is demanding. So if T-Mobile steps back and we see FCC Chairman Carr accepting EchoStar’s offer to sell spectrum (and canceling the idea of a 2GHz MSS NPRM that might open up the band for sharing with Starlink), there’s no realistic prospect of Starlink and EchoStar agreeing on price.
We’d guess that Deutsche Telekom might want to wait for more evidence of the success or otherwise of T-Mobile’s D2D collaboration with Starlink before paying tens of billions for spectrum that they don’t really need, mainly so Starlink can improve the capacity of its D2D network. But if T-Mobile did in the end decide to bid, then either Starlink could buy the H-block (which cost EchoStar only $1.5B) and extend its existing G-block SCS network from 5x5MHz to 10x10MHz, or T-Mobile could offer Starlink access to some of the AWS-4 spectrum in rural areas for D2D.
However, there’s also an alternative path for T-Mobile and AT&T to just swap the 600MHz holdings that AT&T has now agreed to buy from EchoStar, for T-Mobile’s C-band spectrum assets, and not do any further deal with EchoStar.
If T-Mobile did buy all of EchoStar’s midband spectrum, then of course EchoStar’s planned D2D constellation would be abandoned. But there’s no reason to treat that as the default outcome. If instead Verizon puts in a bid for EchoStar’s midband holdings, then it isn’t allied with Starlink and wouldn’t want to risk the possibility that the FCC grants Starlink access to the 2GHz MSS band for D2D and impairs Verizon’s terrestrial usage plans.
So the best way forward would be for EchoStar to go ahead with its own proposed D2D constellation in order to keep exclusive access to the 2GHz MSS band in the US. Then Verizon could buy EchoStar’s AWS-3 and H-block holdings and lease AWS-4 from EchoStar in urban areas, while EchoStar coordinates D2D usage in rural and remote areas outside the reach of Verizon’s towers.
And finally if neither T-Mobile nor Verizon show up with an acceptable bid, then EchoStar will still want to preserve its MSS spectrum rights (and the associated terrestrial spectrum value in the US) by going ahead with the planned D2D constellation. Thus there are four possible scenarios and only in the first of them would EchoStar’s D2D constellation be abandoned:
1) T-Mobile buys all of EchoStar’s midband spectrum (and shares some with Starlink)
2) T-Mobile just does a swap with AT&T (600MHz for C-band)
3) Verizon buys EchoStar’s AWS-3 spectrum and leases AWS-4 in urban areas
4) No one shows up with $30B to meet EchoStar’s asking price.
On balance, assuming FCC Chairman Carr accepts the current EchoStar-AT&T deal, it therefore seems more likely than not that at least the first stage of EchoStar’s constellation will be built. And analysts who assume it won’t be and that Charlie Ergen is simply planning to sell up and retire might instead find themselves watching this show for many more years to come.
Permalink
08.14.25
Posted in AST SpaceMobile, Financials, Inmarsat, Operators, Regulatory, Spectrum, ViaSat at 9:02 pm by timfarrar
The famous saying from George Santayana is one that often comes to mind in the MSS industry, where companies repeatedly make the same mistakes as their predecessors a decade or two ago. And this blog has plenty of posts from 2009-14 about the mistakes made by MSV/LightSquared and Phil Falcone (who incidentally was so irritated by my posts that he was moved to comment on one of them from his Harbinger Capital computer – which is why my X/Twitter bio says that “I enjoy annoying billionaires”).
So it’s now particularly ironic to see that ancient history once again take center stage in the industry as the dispute between Viasat and Ligado/AST heats up. While Phil Falcone has other things on his mind nowadays, some of us remember those days only too well, including Jennifer Manner, who worked at MSV/SkyTerra from 2005-2009. Back then, Inmarsat and MSV signed a 100 year long Cooperation Agreement which was hugely advantageous to Inmarsat and has been a millstone around Ligado’s neck ever since. It has also been the source of endless disputes over the years as Ligado ran short of money, and Inmarsat tried to make sure it collected as much as possible.
The agreement was great for Inmarsat (which received ~$1.7B in spectrum lease payments, while its new owner, Viasat, stands to receive billions more between now and 2107) and Rupert Pearce, then General Counsel of Inmarsat, who negotiated the agreement and subsequently moved on to become CEO of Inmarsat. MSV’s then CEO Alex Good signed the agreement because Falcone had told him that an agreement was needed before Harbinger would provide a sorely needed $500M cash infusion (and Falcone had no understanding of what it actually said). Of course Falcone had many regrets later on, when LightSquared was forced into bankruptcy by GPS interference concerns, and once it became clear that Ligado was not going to deliver a windfall from its spectrum holdings, he unsuccessfully sued MSV’s executives and owners.
That brings us to today, when the dispute flared up once again, and both Viasat and Ligado filed competing motions with the bankruptcy court, detailing a dispute over the agreement to assume the Cooperation Agreement and sublease the spectrum to AST. There was a contentious mediation which had appeared to be settled back in June.
Now Ligado alleges that the Cooperation Agreement does not prohibit either Ligado or AST from seeking access to more L-band spectrum outside the US in the future, while Viasat alleges that the Cooperation Agreement has always prevented Ligado from operating outside the US, and AST should also be bound by these terms.
Ligado cites the drafting of the Mediation Agreement to support its argument that the only limitation is on AST’s initial application for its LEO constellation and nothing stops it from making modification requests in the future. It also includes a curious declaration from CEO Doug Smith, which sets out Ligado’s attempts to do a satellite lease deal with Avanti in 2016, at a time when there was lots of intrigue around Avanti’s future.
On the other hand Viasat argues that the Cooperation Agreement contains multiple references to Inmarsat’s exclusivity outside the US, and that the company would never have agreed to a deal that left Ligado or AST with the potential to interfere with its operations elsewhere in the world. Of course, Viasat has its own ambitions to build a LEO D2D constellation in partnership with Space42, operating in the L-band around the world, plus the 2GHz MSS band in Europe.
It remains unclear what the outcome of this dispute will be, especially as US bankruptcy courts often tend to favor the debtor in disagreements with creditors, but this could hold up the proceedings for quite a while. That may be one of Viasat’s objectives, as it looks towards an EU decision on 2GHz by the end of the year, and tries to cement its own LEO funding plans. Ligado’s submission even states explicitly that “Inmarsat’s position poses an existential threat both to the viability of the AST Transaction and the feasibility of the [Bankruptcy Reorganization] Plan”.
It is also intriguing why AST is so keen to pursue L-band rights outside the US, especially as these will undoubtedly be very difficult to secure, given the longstanding presence of both Viasat/Inmarsat and Space42/Thuraya. However, an application by Viasat to shift spectrum from GEO to LEO could provide an opening and AST would certainly prefer it if Viasat didn’t build another competing LEO NTN/D2D constellation.
But I also suspect that AST realizes the weakness of its claim to 2GHz (where the company claimed to have “priority rights” from last week’s deal with Sky and Space Global, omitting to mention that these are low priority) and the not insignificant probability that it will lose the EU 2GHz competition to either SES/Lynk or EchoStar (most observers think Viasat is fairly certain to retain its rights and there is only expected to be one other wideband license up for grabs). This would mean AST has little option other than to pursue L-band rights on a global basis if it wants to build a new constellation operating in “midband” spectrum in a few years time.
Now we wait to see how this develops. But for the time being AST may no longer be able to claim a clear path to developing what it asserts will be “broadband” D2D through use of MSS spectrum. So while this dispute continues, the company will have to focus on its very limited terrestrial spectrum leases with AT&T and Verizon, which will at best be sufficient to offer a narrowband service that is similar to Starlink (and will need the FCC to approve AST’s non-compliant SCS application, which is not at all certain).
Permalink
08.06.25
Posted in AST SpaceMobile, Echostar, Operators, Regulatory, Spectrum at 3:51 pm by timfarrar
AST is clearly frantic to talk about anything other than the “developmental delays” which are holding up shipment of the FM1 satellite to India and have caused the launch to be pushed back to late fall, despite some employees apparently taking the trouble to go public about the company’s satellite manufacturing tribulations.
So that helps to explain the bizarre announcement today that AST has an “Agreement to Acquire Global S-Band Spectrum Priority Rights Held under the International Telecommunication Union”. AST clearly didn’t want anyone to look to closely at this spectrum deal, because they simply refer to acquiring an unnamed “entity”, and the press release is disingenuously worded to convince the company’s clueless cult of investors that AST will have priority over “up to an additional 60 MHz of mid-band satellite spectrum”.
It doesn’t take much effort to identify the entity concerned, which is Sky and Space Global (SSG), as multiple people have confirmed to me today. SSG made a failed attempt to enter the MSS market almost a decade ago, after going public in Australia, hyping up its “unique expertise in space technology” that was “set to revolutionize the existing satellite communications industry with its price disruptive first mover technology” and “bring affordable coverage to billions of the world’s most unserved people”. AST’s original business plan (which involved a large number of nano-satellites and was intended to start with an equatorial constellation) could almost have been taken straight from the SSG pitch.
SSG only launched 3 satellites back in 2017, which de-orbited in spring 2023, though the filing was brought back into use by one of the satellites launched on the Jan 14 Falcon 9 Transporter-12 rideshare. But what AST’s language is trying to obscure is that SSG’s ITU filings have lower priority than both EchoStar and Omnispace, and also describe a system which is completely incompatible with AST’s recent application to the FCC.
AST is now planning 248 satellites of which 220 will be at 53 degrees inclination and the remaining 28 in sun synchronous orbit, having abandoned its original plan for an equatorial constellation. However, SSG (whose filing is named SSG-CSL in the ITU database) has filed for only 3 test satellites in sun synchronous orbit and the remaining 360 satellites in near equatorial orbits (0, 10 and 13 degrees inclination). So even if AST adjusted its orbit plan to conform with SSG’s filings, it would then be useless for serving high value markets in Central and North America, Europe, the Middle East and Asia.
That’s why it isn’t surprising that SSG’s licenses are so cheap, compared with EchoStar and Omnispace, and why by choosing to acquire SSG rather than say Omnispace, it is clear that AST is more interesting in gaining favorable PR (from people who either don’t understand or would prefer to lie about how spectrum rights work) than actually providing service using this filing. Just don’t ask when (if ever) AST will actually launch a constellation.
Permalink
08.02.25
Posted in AST SpaceMobile, Echostar, Handheld, Lynk, Operators, Regulatory, Services, SES, SpaceX, Spectrum, ViaSat at 9:36 am by timfarrar
Yesterday EchoStar chose to announce its plans for a new $5B D2D constellation of 200 satellites, including an initial US$1.3B contract with MDA to build the first 100 satellites. Though the MDA contract was in line with my prediction back in March, EchoStar’s heavy emphasis on prospective wholesale partnerships with mobile operators during the results call suggests that Apple has declined to provide financial backing for the system. That’s perhaps unsurprising after the press revelations in May describing a lack of consensus within Apple about whether to continue investing in D2D.
As EchoStar CEO Akhavan noted in the results call, EchoStar had to make a decision now, because the EU is in the process of deciding what to do about the current European 2GHz licenses held by EchoStar and Viasat when they expire in spring 2027. Indeed I understand that EchoStar assured the EU of its plans to build this system in its confidential response to the EU’s consultation back on June 30. Now we face an all-out battle between at least four players (Viasat, EchoStar, AST/Vodafone and SES/Lynk) for only two licenses when they are awarded at the end of this year.
However, EchoStar’s announcement also came as an unwelcome surprise to many investors, who were hoping that reports earlier in the week of FCC Chairman Carr’s “Best and Final Offer” to sell AWS-4 spectrum signaled that EchoStar would scale back its ambitions and strike a deal to sell or lease this spectrum. Contrary to some analyst perceptions, the biggest threat from the FCC has always been a potential rulemaking on the 2GHz MSS band that would open it up to additional sharing by Starlink. However, it was also very unlikely that Elon Musk and Charlie Ergen would have a meeting of minds on the value of this spectrum in any commercial deal for Starlink to access the band.
So its now clear that Ergen has decided to defy Carr’s mandate and move forward on his own, without providing any evidence that a major new partner for the system has been secured. Hopefully clarity on financing and partnerships will be provided in September when EchoStar has promised to give more details of its plans. But in the meantime, Carr must decide whether to launch a 2GHz rulemaking or leave Starlink out in the cold without access to MSS spectrum that will soon be sorely needed to increase the capacity of its D2D system. Carr’s decision may well turn on whether Ergen has secured President Trump’s backing, after his recent falling out with Elon Musk, and that would certainly help to explain why EchoStar is highlighting a large headline investment of $5B in the planned D2D system.
Fortuitously for those who are trying to make sense of these developments, yesterday evening I also released my new 100+ page deep dive report on D2D, telling you everything you need to know about D2D technology, regulation and the progress of all the different satellite operators involved in this market, updated with the latest information on EchoStar, AST, Starlink, Apple/Globalstar and other planned systems. We’ve seen lots of ludicrous forecasts about the size of this market, which simply fail to understand the technological constraints on these services in terms of capacity, data rates and costs. Unlike these other forecasts, my analysis looks at realistic capacity, usage and pricing models to assess how many customers Starlink and AST’s systems can serve and what they will need to charge per Gbyte of capacity. That’s a familiar topic to who followed my blog posts on LightSquared back in 2011-12 when it became clear that there was no there there…
I also analyze regulatory constraints, feasible deployment schedules (especially in light of continuing delays for AST which make the company’s claimed launch plans totally implausible) and how much spectrum will be needed for these systems to operate. As I discussed in another report back in January, MSS spectrum (and the 2GHz band in particular) is likely to be critical to providing adequate capacity for D2D constellations. Starlink only has a paired 5MHz block of spectrum in the US, but has already decided that it needed to upgrade to a paired 15MHz block in New Zealand after only 6 months of operations. So EchoStar’s announcement, and how the FCC now decides to respond, will be critical in determining the future direction of this market.
Permalink
07.06.25
Posted in Echostar, Financials, Operators, Regulatory, SpaceX, Spectrum at 1:05 pm by timfarrar
After focusing my public posts mainly on Twitter/X threads for the past couple of years, I thought it would be better to resume blogging, especially as it’s got harder and harder to search X posts effectively. I’ve also been publishing numerous research publications, which included a detailed report on the IFC market last summer, an updated profile and revenue forecasts for Starlink in October 2024, and a new report projecting demand for satellite capacity in May 2025 that gives a full breakdown between LEO and GEO out to 2033 across the key professional verticals (maritime, aviation, backhaul, enterprise and government). Unlike some other industry forecasts, we are happy to share full details of our spreadsheets containing the historical base data, forecasting methodology and assumptions. One major satellite operator told us, “your assumptions (especially on the GEO outlook) differ from Novaspace’s, which is a bit more optimistic about the future of GEO (for now). And I tend to agree with your assessment/assumptions.”
And due to increased interest in the sector from investors, and the rapid pace of announcements, particularly in D2D, the research service now includes regular (approximately monthly) updates in response to key developments in the industry and takeaways from industry conferences. These include:
A summary of the WSBW conference (Sep 2024)
A note on the Globalstar-Apple deal (Nov 2024)
A briefing on the Globalstar investor day (Dec 2024)
An update on D2D and Starlink (Jan 2025)
A note on Starlink’s C-band filing (Feb 2025)
A summary of developments at Satellite 2025 (Mar 2025)
A review of AST’s technology (Apr 2025)
An update on EchoStar and the FCC (May 2025)
An update on EchoStar and AST (Jun 2025), and
A briefing giving details of Starlink’s international financials that have never been reported in the press (Jun 2025).
As another subscriber said recently, “Fascinating, as ever. Thanks for your continued bar-settingly-brilliant analysis.”
Permalink
02.07.23
Posted in Echostar, Financials, Globalstar, Handheld, Operators, Services, SpaceX, Spectrum at 8:35 pm by timfarrar
Yesterday, Globalstar filed an 8-K noting that on January 31 it had entered into a forbearance agreement with MDA and Rocket Lab, the contractors building 17 new satellites, under which additional payments beyond an initial $20M will be delayed until March 15. In addition, Globalstar noted that:
“The Company is currently exploring financing options for satisfying its remaining payment obligations under the Contractor Agreements, as well as its obligation to refinance its 2019 Facility Agreement. It cannot currently predict whether, and on what terms, any such financing will be available but maximizing shareholder value is the driving consideration.”
The reason for these financing challenges is that Globalstar is unable to close on the new first lien debt agreement to fund the satellites (that was expected to be backed by Apple to the tune of $450M) unless and until it has refinanced the $150M currently owed to Echostar under the 2019 Facility Agreement. Under the September 2022 Partnership Agreements between Apple and Globalstar, Globalstar is required:
“(i) upon commencement of the Services, to convert all loans outstanding under the 2019 Facility Agreement that are held by affiliates of the Thermo Companies (collectively, “Thermo”) into non-convertible perpetual preferred stock with a cash pay interest rate of 7% per annum or lower, convertible preferred stock with cash pay interest rate of 4% per annum or lower, common stock, or another security acceptable to Partner (the “Thermo Debt Conversion”) and (ii) within 90 days of the commencement of the Services, to refinance or convert all loans outstanding under the 2019 Facility Agreement that are held by persons other than Thermo on terms that are no less favorable to the Company than the Thermo Debt Conversion.”
Of course there was no chance whatsoever that Charlie Ergen would agree to exchange first lien debt with a PIK interest rate of 13.5% for preferred stock that would be subordinate to ~$500M of new first lien debt with an interest rate of 4%-7%, so the only plausible reason for Jay Monroe to agree to these terms was a Hail Mary bet that he could find a buyer for Globalstar before the deadline occurred for Echostar’s debt conversion.
That deadline is coming due on Monday February 13, 90 days after Apple began offering services on November 15, 2022 and no buyer has appeared for Globalstar. The Key Terms Agreement has specific provisions dealing with an offer for the company:
(i) Sale Notice. If a third party submits a non-frivolous proposal to acquire any material Required Resource or the Spectrum Subsidiary or for a Change of Control transaction involving Globalstar or Globalstar’s board of directors (or any committee thereof, including the Strategic Review Committee) approves a process with respect to the potential sale of any material Required Resource or the Spectrum Subsidiary or a Change of Control transaction (each, a “Sale Transaction”), Globalstar shall provide written notice of the Sale Transaction, with the material terms and related process of such transaction, including (A) at a minimum the structure of, and the assets proposed to be sold in the Sale Transaction and any relevant timelines or deadlines relating to the Sale Transaction, and (B) other material terms and related process to the extent permitted by Globalstar’s confidentiality obligations (a “Sale Notice”), to Partner within one day following Globalstar’s receipt of such proposal or such determination by Globalstar’s board of directors (or any committee thereof, including the Strategic Review Committee), which Sale Notice shall be considered Globalstar Confidential Information. If Globalstar enters into any confidentiality agreement relating to a potential Sale Transaction after the Effective Date, such agreement shall not restrict Globalstar from providing to Partner any of the information set forth in Section 10.2(e)(i)(A) that is required to be included in the Sale Notice.
(ii) Discussions. Following the delivery of the Sale Notice to Partner, Globalstar’s board of directors (or any committee thereof, including the Strategic Review Committee) shall, and shall cause the management, employees and other representatives of Globalstar to conduct discussions with Partner in good faith and on a non-exclusive basis and provide Partner with all information made available or provided to any potential third party acquiror, to enable Partner to make a proposal to Globalstar for a Sale Transaction, during the ten business day period following the date of the Sale Notice. Globalstar hereby agrees that it shall not, and shall cause its Related Entities, management, employees and other representatives not to, enter into a term sheet or letter of intent or other binding agreement or obligation with any other third party with respect to a Sale Transaction during the ten business day period commencing on the date of the Sale Notice.
(iii) Proposals. If Partner makes a proposal for a Sale Transaction prior to the expiration of the ten business day period, then Globalstar’s board of directors (or any committee thereof, including the Strategic Review Committee) will exercise its fiduciary duties to evaluate Partner’s proposal along with any other proposals for a Sale Transaction. In the event Globalstar’s board of directors (or any committee thereof, including the Strategic Review Committee) determines the proposal from Partner is in the best interests of Globalstar and its stockholders, then Globalstar will enter into a binding agreement to negotiate in good faith with Partner on an exclusive basis for a period of not less than 20 business days.
(iv) Consummation. If Partner declines to make, or Globalstar (after having considered such offer or proposal in good faith) declines to accept or pursue, a proposal for a Sale Transaction from Partner, then Globalstar shall be permitted to consummate a Sale Transaction with a third party, provided that Globalstar shall have first obtained and delivered to Partner a written agreement from the acquiror in the form included as Attachment 7.
So what happens next? The statement in the 8-K that “maximizing shareholder value is the driving consideration” suggests that Ergen will soon (or perhaps already has) submitted a “non-frivolous proposal” to acquire Globalstar, presumably at a very low price, given that Globalstar will soon be in breach of its obligations to Apple. This will trigger the 30 (business) day period for Globalstar to advise Apple of a sale transaction and then negotiate on an exclusive basis, which would also run through the mid March satellite payment deferral period (assuming Ergen has now made an offer for the company).
However, given the cards that Ergen and Apple hold in respect of a potential forced default on the Apple agreement, and that neither appears to have much interest (or belief that there is meaningful value) in Band 53, it is hard to see how their offers would meaningfully exceed the value generated by Globalstar’s satellite services, including the value of Apple’s messaging contract. I estimate that in those circumstances the best Globalstar might obtain would be roughly $1B-$1.5B in cash plus an agreement to assume the costs of the construction contract. That would be a pretty disastrous outcome for Jay Monroe after he’s invested over $800M and 20 years of his life in trying (against overwhelming odds) to make something of Globalstar, and Globalstar shareholders would also be hugely disappointed.
The most interesting question is what Ergen would seek to gain from Apple, if he was to either enable Apple to buy Globalstar at a low price or buy Globalstar himself (presumably through Echostar) and continue the partnership. One obvious possibility could be to collaborate to include the 2GHz satellite spectrum held by DISH and Echostar into future iPhones for additional NTN capacity. Perhaps not entirely coincidentally, Echostar announced plans to build a 28 satellite LEO IoT network just last week.
I also noted a few days ago that D2D is likely to be the next focus for hype over Starlink’s future prospects (which we can already see in the decision of SpaceX’s Jonathan Hofeller to join the Satellite-Cellular panel at Satellite 2023). And I predicted in my D2D report that SpaceX’s next step might be to acquire more MSS spectrum, most obviously Omnispace, but perhaps even Ligado. So now we could face the real prospect of a fight for this new market opportunity and the associated global satellite spectrum rights between Musk and Ergen, building on prior skirmishes over the 12.2-12.7GHz band. Wouldn’t that be fun!
Permalink
02.05.23
Posted in Globalstar, Handheld, Iridium, Operators, Regulatory, Services, SpaceX, Spectrum, T-Mobile at 9:42 pm by timfarrar
There’s been plenty of hype about the Direct-to-Device (D2D) market for satellite to smartphone connectivity in the last couple of years, and that has only intensified in the wake of recent announcements about Apple’s partnership with Globalstar and Qualcomm’s partnership with Iridium. Some analysts have even gone so far as to suggest that D2D represents the “largest opportunity in Satcom’s history“.
But the reality is that going beyond basic messaging presents significant technical challenges, and the messaging market will remain modest in size, anchored as it is by the size of Apple’s deal with Globalstar, which costs Apple little more than $100M per year for both global coverage and the ability to support tens of billions of messages per year. Regulatory challenges are still significant, with some regulators going so far as to ban systems that plan to use terrestrial spectrum from operating anywhere near their territory.
Nevertheless, D2D is becoming the next opportunity that SpaceX can hype, beyond its core fixed broadband market, as it looks for additional increases in the company’s valuation so it can keep raising money to keep developing Starship, while putting even more distance between Starlink and broadband competitors like OneWeb and Kuiper. And just as SpaceX has scared away potential investors in nascent LEO broadband systems like Telesat’s Lightspeed, we expect SpaceX to crowd out many of the other players in the D2D market, now that funding for speculative space projects is becoming more scarce.
Unfortunately, the perspectives of some investors and commentators have been skewed by the unrealistic D2D projections that were made during the SPAC boom, and they have failed to look at relevant benchmarks such as current levels of spending on international roaming. Our new 70+ page report on the D2D satellite smartphone communications opportunity, which has just been released, looks in detail at the regulatory constraints and technical limits to system performance, and projects revenue growth in both the messaging segment and in the voice and data segment over the next decade.
Our conclusion is that while D2D messaging is likely to deliver meaningful upside for existing MSS networks like Globalstar and Iridium, it will be much more difficult to gain global consensus on use of terrestrial spectrum. As a result, SpaceX is likely to hedge its bets and pursue a twin-track strategy of seeking access to both terrestrial and satellite spectrum, and potentially follow up its 2021 acquisition of Swarm with further deals to buy satellite operators and their spectrum licenses.
Then, as Starlink moves beyond its initial D2D messaging capabilities later this decade, and perhaps even amplifies the hype still further by suggesting that the next step will be to build a SpaceX smartphone, Starlink is likely to gain a majority share of the D2D market. Even so we project the potential market size to remain far smaller than Starlink’s fixed broadband opportunity and it is not at all clear that it will be possible to make an economic return on these D2D investments.
If you’d like to order a copy of the report then an order form is available here. And you can hear me speak about many of these issues this coming week at the SmallSat Symposium in Mountain View, CA.
Permalink
09.08.22
Posted in Broadband, Financials, Operators, SpaceX, Spectrum at 10:06 am by timfarrar
Up until 2020, I was very skeptical about the LEO broadband opportunity, and whether any of the planned systems would be able to raise enough money and build out a constellation that could deliver a service that is competitive with existing GEO operators. That skepticism seemed entirely justified after the failure of LeoSat in late 2019 and OneWeb’s spiral towards a bankruptcy filing in March 2020. SpaceX had also given wildly over-ambitious forecasts for Starlink’s revenue and timing, with projections for $6B of revenue in 2021, rising to over $30B in 2025.
But over the last two years, Starlink has launched a consumer broadband service that has upended the industry by providing vastly more capacity per subscriber than Viasat and Hughes, with a simple, easy to install terminal, and as of June 2022 already served over 400K users. Successfully developing such a system is an extraordinary technical feat when so many previous broadband constellation plans have failed. And after raising over $6B in the last 2.5 years at ever increasing valuations, SpaceX has been able to launch thousands of Starlink satellites and build scale that competitors will struggle to match.
I didn’t think that SpaceX would pull this off, but they did, and today too many people in the industry, who are rightly skeptical of Elon Musk’s litany of unfulfilled promises, remain far too complacent and are continuing to dismiss Starlink as just a consumer service that won’t threaten other parts of the satellite market, or are even suggesting that the network remains economically unviable and is doomed to failure.
However, the dam is starting to break for acceptance of Starlink amongst professional users, with Royal Caribbean’s recent move to deploy Starlink representing just the start of disruption in traditional satellite verticals. And SpaceX’s latest $2B in equity funding should see the company through to late 2023, by which time I expect Starlink to have captured around 1M users and have reached cash flow breakeven (even accounting for ongoing satellite replenishment costs).
That doesn’t mean Starlink (or SpaceX more broadly) will offer a positive return to those recent investors at the ludicrous valuation of $127B, because satellite will remain a last resort solution compared to terrestrial fiber, cable modem and even 5G fixed wireless options, but it does mean that there’s no reason to suppose that Starlink will cease to be an enormous competitive threat to the satellite industry in the foreseeable future.
One largely unrecognized issue in the LEO market is that there are significant benefits to scale, due to the virtuous circle that comes from adding more satellites to a constellation, as shown in the diagram below.
With more satellites in the sky, the user terminal antennas don’t have to scan as far to find a satellite to connect to, so they can be cheaper, with fewer antenna elements. And the altitude of the constellation can be lower, improving the link margin and capacity, and allowing the user terminal to operate at lower power. Capacity provisioning also becomes more uniform, as traffic loading can be averaged across multiple satellites, improving the quality of service. Starlink has been designed from the ground up to minimize the cost of the terminal, unlike traditional satellite systems (even recent designs like Telesat’s Lightspeed), which optimize the satellite and treat the terminal as an afterthought. Cheaper terminals and more capacity attract more users and generate more revenue, which can be fed back into building yet more satellites, making it ever harder for competitors to catch up.
So now we’re in a position where Starlink has clearly won the race for LEO broadband (at least for the next 4-5 years, since Amazon’s Kuiper won’t be completed before 2026-27), and is likely to become the largest satellite operator by revenue within that timeframe. Our new report on LEO broadband and the future of the satellite industry forecasts what this means for industrywide growth in revenue and traffic, and analyzes how satellite operators, distributors and equipment suppliers are likely to respond to what for many will represent an existential threat. The outcomes will include an acceleration of industry consolidation, decisions to exit, and even bankruptcies. The report also complements our June 2022 Starlink profile, which analyzes Starlink’s technology and forecasts Starlink’s revenue growth by segment. You can order one or both reports using the form here, or contact us to discuss subscription options for all of our industry analysis.
Permalink
01.18.22
Posted in Aeronautical, AT&T, Operators, Regulatory, Services, Spectrum, Verizon at 10:45 pm by timfarrar
What on earth has gone wrong in the C-band rollout that has led to hundreds if not thousands of planes now being grounded? That’s the question that so far the news reports seem to have failed to get a grip on, given the complex technology and difficulty in interpreting what is going on behind the scenes between the FAA, FCC and wireless companies.
On January 4 a deal was announced between the FAA and the wireless companies to delay the rollout by two weeks in exchange for DoT and FAA agreeing that they “will not seek or demand any further delays of C-Band deployment, in whole or in part”. The FAA also committed that it would “work to issue AMOCs as filed by aviation stakeholders to allow for operation of aircraft to the extent permissible.”
The FAA is issuing two forms of notices to deal with the possibility of interference from 5G. The first of these is the NOTAM (Notice To Air Missions) for a specific airport, which sets out constraints on aircraft operations, such as restrictions on use of particular flight paths during bad weather. The second is the AMOC (Alternative Means Of Compliance) which allows certain altimeters (and therefore the specific aircraft types which carry them) to be exempt from these flight path restrictions if the FAA’s analysis has shown that the altimeter type is “high performing” (i.e. resilient to the possibility of interference).
What appears to have happened in the last two weeks is that the FAA has failed to issue as many AMOCs as had been expected and therefore a very large number of aircraft remain subject to the NOTAM restrictions. As of Tuesday, the FAA had only approved two types of altimeter, which account for “about 45% of the US commercial aircraft fleet” and “include Boeing’s 737, 747, 757, 767, MD-10 and MD-11 and the Airbus A310, A319, A320, A321, A330 and A350.” This leaves more than half of the US fleet subject to restrictions, including most regional and wide body jets, notably Boeing’s 777, 787 and 747 aircraft.
Over the weekend we heard stories, based on FAA briefings, about new constraints on 787 operations because “during the two-week delay in deploying new 5G service, safety experts determined that 5G interference with the aircraft’s radio altimeter could prevent engine and braking systems from transitioning to landing mode, which could prevent an aircraft from stopping on the runway.”
But the FAA appears to have failed to complete its analysis of the 777 and 747 during this period, and in what seems to have been an attempt to force the FAA to address the issue, Boeing released an advisory to airlines on Monday evening covering the 777 and 747-8 which “recommends operators do not operate 777 aircraft on approach and landing to U.S. runways” unless there is an alternative means of compliance. This language presumably means that Boeing believes that these altimeters should be approved through the AMOC process, but the FAA has failed to act. As a result, international airlines are now cancelling flights to the US on Wednesday or rearranging them to use other aircraft including the 787 and A380.
One obvious question (even ignoring the delays in taking action before January 3) is why the FAA has been so slow to make the expected progress over the last two weeks. Is it sheer incompetence? Or did the FAA think it was going to be able to extract a better deal from the wireless carriers, with a new and permanently lower signal level, as some aviation experts think could happen? Certainly the FAA now appears to have abandoned its commitment not to demand “further delays of C-Band deployment” and instead secured an indefinite delay to deployments near additional airports, instead of the maximum of 50 airports agreed to on January 3 (which is essentially a return to the demands from DoT on December 31). And the FAA maintained its hostility to C-Band operations even after signing an agreement not to try and delay them.
No wonder, even FCC Chair Rosenworcel, after keeping quiet during the January 3 negotiations, expressed frustration noting that “the FAA has a process in place to assess altimeter performance in the 5G environment and resolve any remaining concerns. It is essential that the FAA now complete this process with both care and speed.” Conversely, the DoT, who on January 4 celebrated the “the amazing [FAA] team for long hours over the holiday to minimize flight disruptions” are now conspicuously silent about the lack of progress over this most recent holiday weekend, with no commitment from the Secretary of Transportation to move quickly.
So how does this end? Will the FAA issue the AMOC approvals for the 777 and 747-8 on Wednesday before tens of thousands of Americans are stranded overseas, as the airline CEOs predicted on Monday? That seems to be what US airlines are betting on, at least for now. And what about regional jets, which account for most of the remaining aircraft, and whose representatives are complaining they have been left out of the agreement? In that case, disruption may be sporadic, since there is no grounding order and cancellations will be dependent on the weather, so things may not come to a head until the next major winter storm.
None of this looks good for the Administration and it certainly isn’t “great work by all involved” as the White House Chief of Staff suggested. However, it looks like the FAA will have to bear the lion’s share of the blame for what seems highly likely to be substantial disruption in air travel over the next few days and possibly much longer when it comes to regional jets.
UPDATE (Thu Jan 20): After the debacle on Tuesday, with the cancellation of 777 and 747-8 flights by multiple international airlines, it seems the FAA was embarrassed (or forced) into accelerating the issuance of AMOC approvals for additional altimeters, approving the 777 on Wednesday morning, and the number of altimeters approved and percentage of the US fleet covered has now grown very quickly:
Tuesday Jan 18: 2 altimeters and 45% of the US fleet
Wednesday Jan 19: 5 altimeters and 62% of the US fleet
Thursday Jan 20: 13 altimeters and 78% of the US fleet.
The result has been that most disruption has been avoided, although regional jets remain a concern, with some problems resulting from low visibility. However, the rapid pace of approvals, and the expectation from airlines that there won’t be “any material disruption going forward”, further discredits the FAA’s fearmongering over the weekend, not least because an AMOC has now been issued covering all 787 jets, which were supposedly the cause of greatest alarm. Suggestions that airlines would need to “swap out the altimeters” in a process lasting years and costing billions of dollars, also appear to be well wide of the mark.
At this point the consensus seems to be that this has been a crisis created by the FAA’s foot dragging, and the more AMOC approvals that are issued, the more obvious that becomes. So the biggest remaining question is whether and when the Secretary of Transportation will ask for the resignation of the FAA Administrator, who after all is a holdover from the last administration, and therefore will make a convenient scapegoat for this whole episode? However, it also shouldn’t go unnoticed that the reaction of the President (echoed by members of Congress) was to push “as hard as I can to have the 5G folks hold up” rather than calling out the incompetence and delaying tactics of the FAA.
UPDATE (Fri Jan 21): It seems like I was far too confident last night that the 5G problem is on its way to being solved, despite airline executives declaring that the doomsday scenario is over because “The technical experts that are working on it tell us it’s really not that complicated once they all are able to share information and work on it…So they seem encouraged that we’ll be able to address this in a way that allows for full deployment of 5G, including near airports.”
As described by the Regional Airline Association, the tests are conducted by manufacturers and then those plans are “submitted…to the FAA” who issue the AMOC. The airlines appear confident that those manufacturer tests show there will be no problems even after full deployment of 5G.
But the FAA’s statements appear to confirm that they are only issuing AMOCs approving altimeters to operate while the current 5G deployment restrictions remain in place: “The new safety buffer announced Tuesday around airports in the 5G deployment further expanded the number of airports available to planes with previously cleared altimeters to perform low-visibility landings.”
So it is perhaps no wonder Boeing is refusing to comment because they don’t want to get into a public shouting match with the FAA, despite the behind the scenes confrontation over the 777 at the beginning of this week outlined above. But you can be sure that many aviation interests are demanding that the restrictions continue permanently and the FAA is preparing for another showdown on July 5th, when the current six month period of restrictions is set to expire.
Permalink
« Previous entries Next Page » Next Page »
