Why AST SpaceMobile Sank Today
Key Points
SpaceX announced it agreed to purchase 14 megahertz of low-band wireless spectrum yesterday.
It has been reported that AST was seeking those same spectrum assets, but was outbid.
SpaceX's announcement also caused a big selloff among major telecom providers, who are AST's partners.
Shares of satellite-based wireless company AST SpaceMobile (NASDAQ: ASTS) sank 14.6% on Friday as of 1:36 p.m.
AST fell along with other telecom stocks today, after Space Exploration Technologies (NASDAQ: SPCX) announced after market close yesterday that it had agreed to purchase up to 14 megahertz in the 800 MHz band.
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The move indicated SpaceX is very serious about establishing a comprehensive wireless mobile platform, not just a service for remote areas where terrestrial networks struggle to reach. Moreover, SpaceX may have hurt ASTS specifically by outbidding the company on this particular band of spectrum, which industry news outlets reported AST had been seeking.
SpaceX out-muscles AST for low-band spectrum
Yesterday, SpaceX announced it had reached an agreement to acquire up to 14 megahertz of spectrum in the 800 MHz band. According to SpaceX, the low-band spectrum "addresses one of the key remaining technical gaps that will pave the way for Starlink Mobile to become a major mobile carrier in the U.S."
Obviously, adding a fourth major telecom competitor, and one as technically savvy as Elon Musk's SpaceX, could pose a serious challenge for the "big three" wireless telecom companies. All of their stocks are down today as well. That's also a problem for AST SpaceMobile, which has agreements with Verizon (NYSE: VZ) and AT&T (NYSE: T) to provide satellite capabilities to these companies' customers. Additionally, last week, all three major telecoms announced a joint venture aimed at eliminating dead zones and improving satellite connections where terrestrial networks don't reach.
AST does have access to a robust spectrum through its own holdings and its partnerships with AT&T and Verizon; however, industry reports also revealed that AST had coveted the spectrum that SpaceX just purchased, suggesting a better-funded competitor outbid AST and may have set back AST's internal business plan.
Image source: Getty Images.
An overblown buying opportunity or sign of danger?
AST is already down 63% from its all-time highs set back as recently as May, as SpaceX's June IPO and these subsequent competitive concerns have decimated AST's stock.
There are still skeptics who doubt that SpaceX will be able to build a vertically integrated wireless service, as many obstacles remain beyond the mere purchase of spectrum. Still, investors should probably expect this "overhang" on sector valuations to remain for a while, as the threat, or at least the perception of a threat, likely isn't going away.
Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AST SpaceMobile. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.