Satellite cellphones may have taken a big step forward this week after Verizon (VZ 1.03%) announced an expanded partnership with AST SpaceMobile (ASTS 1.40%). According to data provided by S&P Global Market Intelligence, shares of AST SpaceMobile jumped as much as 94.1% this week and are trading 79.1% higher at 3 p.m. ET.
Verizon bets big on AST SpaceMobile
The agreement between the two companies includes usage of the 850 million hertz spectrum that aims to give 100% coverage to the continental United States. Verizon will also invest $100 million in the company, $65 million of which will be commercial prepayments, and the remaining $35 million will be for convertible notes.
This doesn't get the company anywhere near free-cash-flow positive, but it's a step in the right direction.
ASTS Revenue (TTM) data by YCharts. TTM = trailing 12 months.
Hoping for the best
AST SpaceMobile still isn't a sustainable business, but the hope is that this could be a catalyst toward a growing business. Quarterly revenue for the first quarter of 2024 was zero, but Verizon is committing $65 million in revenue to the business long term. That's a solid bet, especially when combined with the AT&T deal signed earlier this year.
While this is encouraging, it's also very early for AST SpaceMobile, and we don't have end-market demand for satellite phones or service in large numbers. So, the business may never get off the ground. That's made me skeptical enough to skip the pop in shares, but it's worth keeping on a watchlist.
