Verizon commits $100M in AST SpaceMobile deal

• Before today, Verizon didn’t express a lot of interest in the direct-to-device (D2D) space

• Now the operators is investing $100 million for an AST SpaceMobile-based service

• The deal will give Verizon coverage in remote corners of the U.S. where cellular signals are unreachable  

A few short months ago, Verizon wasn’t too keen on using its terrestrial spectrum for satellite services. But now it’s jumping on board to invest in AST SpaceMobile, the startup that for several years has touted a relationship with AT&T.

Verizon’s $100 million commitment with AST SpaceMobile includes $65 million ​of​ commercial prepayments, $45 million of which are subject to certain conditions, and $35 million of convertible notes. It's also ponying up 850 MHz spectrum. 

“This new partnership with Verizon will enable AST SpaceMobile to target 100% coverage of the continental United States on premium 850 MHz spectrum with two major U.S. mobile operators in the most valuable wireless market in the world, a transformational commercial milestone,” said AST SpaceMobile founder and CEO Abel Avellan in a press release.

The arrangement will allow cellular consumers to stay connected pretty much wherever they are in the continental United States.  

What Verizon says

“Verizon has always been strategic and efficient with our spectrum strategy. We use the spectrum entrusted to us to deliver outstanding cellular service for our customers through our terrestrial network,” said Srini Kalapala, SVP of Technology and Product Development at Verizon, in a statement.

“By entering into this agreement with AST, we will now be able to use our spectrum in conjunction with AST’s satellite network to provide essential connectivity in remote corners of the U.S. where cellular signals are unreachable through traditional land-based infrastructure,” Kalapala said.

Kalapala’s explanation is notable given that Verizon network executives who met with Fierce at Mobile World Congress in Barcelona earlier this year said they weren’t interested in partnering with anyone because they didn’t see a huge consumer demand for space-based connectivity and didn’t want to give up terrestrial spectrum when satellite companies could use their own spectrum.  

But, “never say never” is a cliché for a reason, so apparently the powers that be at Verizon decided that it’s time to jump into the D2D space – beyond whatever Verizon is doing with Amazon’s Project Kuiper.  

And this is all okie-dokie with AT&T, which just a few weeks ago announced a definitive agreement with AST SpaceMobile, extending until 2030, for AST SpaceMobile to provide a space-based broadband network direct to everyday cell phones.

“AST SpaceMobile’s news today reinforces the shared commitment to providing nationwide space-based broadband direct to everyday cell phones. Together with AST SpaceMobile we have agreed to welcome another mobile operator in the U.S. to bring in more spectrum and more coverage to create an even better solution and enhance service capabilities,” said Chris Sambar, head of Network at AT&T, in a statement. “With AST and the other partners around the globe we are shaping the future of connectivity for all.”

T-Mobile is banking on its relationship with SpaceX, which is using T-Mobile’s 1900 MHz spectrum, for a D2D service that will connect ordinary 4G LTE and 5G phones to coverage from space. T-Mobile expects to offer a commercial service by the end of this year based on that service, which will start with text messaging and eventually move to other capabilities like voice.

Something to note in all of this: If AST SpaceMobile were to fail, that likely would give SpaceX/Starlink a free run at the market in the U.S., and that’s not something AT&T or Verizon would like to see, according to analyst Tim Farrar of TMF Associates.

“While AST still faces many challenges in funding and building a satellite network, this modest investment from Verizon at least keeps open the possibility that there will be some competition for Starlink’s D2D services in the future. Whether it will be more successful than AT&T and Verizon’s prior partnerships with OneWeb and Kuiper remains to be seen,” Farrar told Fierce via email.

Of course, Apple got the party started in 2022 when it unveiled the iPhone 14 with Emergency SOS service powered by Globalstar. The service gets credit for saving lives, and who can argue with that?

Certainly not investors, who drove up AST SpaceMobile shares more than 50% this morning. At press time, AST SpaceMobile (ASTS: NASDAQ) was trading at $8.07, up 51.22%.