{ "docId": "019dd923-622c-750b-8b98-28769ac23caa", "docSlug": "eb80172c6938", "documentTitle": "AST SpaceMobile, Inc. (ASTS)", "authorId": "53_Kerrisdale_Capital", "authorName": "Kerrisdale Capital", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2022-09-01 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 14, "pageCount": 20, "prevPage": 13, "nextPage": 15, "slideType": "villain_critique", "function": "name_villain", "density": "overcrowded", "nDataPoints": 4, "notes": "This is a research note from Kerrisdale Capital arguing against the investment thesis of AST SpaceMobile.", "elementsJson": [ "paragraph" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-28769ac23caa/14", "deckHref": "/decks/019dd923-622c-750b-8b98-28769ac23caa", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-28769ac23caa.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-28769ac23caa#slide-14", "components": [ { "bbox": { "h": 0.022, "w": 0.65, "x": 0.117, "y": 0.891 }, "kind": "callout", "text": "Does any of the foregoing sound like a truly penetrable market for space-based roaming??", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e2de97c0-6bd0-4bb4-9bc5-174cc1ae4be4", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.109, "w": 0.766, "x": 0.117, "y": 0.772 }, "kind": "paragraph", "text": "None of this means rural villages are completely cut off, however. People may not be in constant contact, but they still find ways to stay in touch. They schedule times to speak to loved ones from the landline in town, they walk to hills where they know there is cell service. Sometimes they do what's called \"flashing,\" where someone calls from a landline and immediately hangs up, signaling to the recipient (the more well off relative in a city) to call back. In rural Nigeria they are resourceful and make do with little.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "20667e0f-d5cf-470a-b03c-d58994228f54", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.175, "w": 0.766, "x": 0.117, "y": 0.588 }, "kind": "paragraph", "text": "Let's use Nigeria as an example. In the relatively affluent cities like Lagos, 5G has just been rolled out. In many of the country's northern states, however, where terrestrial networks are the least penetrated and many tens of millions lack cell coverage, the poverty rate is nearly 90%, defined as living on ~$1/day or less. In many rural towns and villages there is literally zero economic activity, where residents rely on government subsidies and family remittances. Illiteracy rates are as high as 80%. Rural populations skew heavily toward the young and elderly as those of working age gravitate to cities for better job prospects. Those within terrestrial coverage do not regularly travel or migrate to rural areas because it's dangerous, particularly in the war-torn parts of the country.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "509e06c8-82df-45d9-98d8-f280bcab5024", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.131, "w": 0.766, "x": 0.117, "y": 0.448 }, "kind": "paragraph", "text": "Space is hard. Selling telecom services to the underserved in sub-Saharan Africa and Asia might be harder. Western-centric telecom investors tend to overweight their own interest in being in constant touch, as well as their own inclination and ability to pay for services, when considering how technology could unlock market potential in these regions without paying close enough attention to why these people are underserved in the first place. The issue is not any technology pain point that AST (or any other company) can alleviate, but rather fundamental socioeconomic obstacles that render building a business case around these populations virtually impossible.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "594e7c45-2911-4cf3-a600-ecfa6fe3e620", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.054, "w": 0.766, "x": 0.117, "y": 0.264 }, "kind": "paragraph", "text": "In our view, even achieving a fraction of the modest sounding 10-11% terminal penetration rates of the entire cellular subscriber base as implied in AST's SPAC financial projections vastly overstates the addressable market for anyone with even poor access to a terrestrial network.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8c9bf603-5b09-4998-bfa3-2fd23ae4c9d9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.065, "w": 0.766, "x": 0.117, "y": 0.094 }, "kind": "paragraph", "text": "niche use case. The fact that in one of the highest ARPU markets globally, the United States, SpaceX / TMUS and Apple iPhone14 recently announced plans to give away basic messaging for free, and Apple's relatively modest annual payment to Globalstar (we estimate ~$70m-$100m) supports that thesis.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e4112df2-d572-4355-87ba-a1f5bdfe51dc", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.087, "w": 0.766, "x": 0.117, "y": 0.168 }, "kind": "paragraph", "text": "In instances where terrestrial networks have been incapacitated due to natural or man-made disasters, AST may have utility as a redundancy service, but even here the value is questionable. If an earthquake hit a population center knocking out the terrestrial cellular network, thousands of simultaneous calls and messages to an AST satellite would likely result in the same network congestion that overwhelms even robust cellular networks during a disaster.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f4f0bdc3-6dc8-44fe-aa32-9ad23a616592", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.054, "w": 0.766, "x": 0.117, "y": 0.327 }, "kind": "paragraph", "text": "By AST's own admission, where it may have its most powerful use cases are areas where there is little-to-no terrestrial coverage, particularly in the developing world. But here too are massive challenges which have stymied penetration attempts by tech companies for years.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ffc1b829-0384-4f4a-b847-a55637478129", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.022, "w": 0.515, "x": 0.117, "y": 0.413 }, "kind": "title", "text": "Underserved Populations Are Underserved For a Reason", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ba3b559e-dbb9-45eb-be2e-9da7cc6c61ba", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 14, "from": 7, "beatId": "9a11c370-b4cf-49e1-805e-ba92c4aa9610", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "The Monster", "beatSlug": "overcoming-monster-the-monster", "evidence": "Detailed critique of AST SpaceMobile Inc.'s technical limitations, design and deployment challenges, and inflated market claims", "position": 0, "confidence": 0.8, "parentBeatName": "Hook", "parentBeatSlug": "hook" } ], "loops": [ { "to": 14, "from": 7, "name": "Cost Of Inaction", "slug": "27-cost-of-inaction", "bestFor": "Urgent budget requests, compliance, risk mitigation", "matchId": "83110eb4-9dda-40a8-927b-7907bc525551", "evidence": "The document highlights the risks and limitations of AST SpaceMobile Inc.'s business model and technological capabilities", "position": 0, "objective": "What are the consequences of investing in AST SpaceMobile Inc.?", "structure": "The Status Quo -> The Hidden Costs Accumulating -> The Future State of Inaction -> The Tipping Point", "confidence": 0.7, "description": "Quantify what happens if the audience does nothing" }, { "to": 14, "from": 13, "name": "Myth Buster", "slug": "12-myth-buster", "bestFor": "Rebranding, changing market perception, correcting false assumptions", "matchId": "a6223904-ab93-434d-ba79-3899613c30ed", "evidence": "The document challenges AST SpaceMobile Inc.'s addressable market claims and highlights the reality of pervasive terrestrial coverage", "position": 1, "objective": "Are AST SpaceMobile Inc.'s market claims accurate?", "structure": "The Common Belief -> The Friction/Failure of that Belief -> The New Truth", "confidence": 0.6, "description": "Address a common misconception head-on to clear the room for a new truth" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }