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Rivals for satellite cellphone service include Elon Musk’s SpaceX, Apple, and Amazon.

A heavenly battle is brawling for your cellphone.

Overhead, competing rings of satellites are readying cell towers in space that will eliminate dead zones down here. The rivals include Elon Musk’s SpaceX, Apple, Amazon.com, and an upstart named AST SpaceMobile.

Since its 2021 initial offering, AST SpaceMobile has lured investors with its aim of delivering 5G-quality voice, data, and video coverage worldwide. It is the only pure stock play on direct-to-cell service.

AST stock rose more than sixfold after announcing partnerships last year with Verizon Communications and AT&T. It has deals with 45 other mobile network operators around the globe. Fans say that gives AST a shot at 2.8 billion wireless subscribers.

Its prospects are dicier than the stock price suggests. The bankruptcies of previous satellite phone ventures cast a shadow on its goal of finding millions of customers who would pay an extra $10 a month for satellite coverage, when it will come cheaper—or free—from rivals.

Foremost among those rivals is SpaceX, with over 6,000 Starlink satellites already orbiting and a thriving home internet service to subsidize its cell service. Those watching Sunday’s Super Bowl saw an ad in which Starlink cell partner T-Mobile US announced that its own direct-to-cell messaging service is now open for anyone in the U.S. to try, including customers of Verizon and AT&T.

The first satellite phone networks were high-profile flops. Motorola’s Iridium sought bankruptcy protection barely a year after its 1998 debut. Globalstar avoided bankruptcy for just a few years more. Their bulky, dedicated phones, and cost of two bucks a minute, found only a couple of hundred thousand subscribers.

The new satellite services will link to everyday cellphones. The idea was already in the air when Musk’s SpaceX launched its first 60 satellites in 2019. The next year, space station astronauts helped the start-up Lynk send a text message to an Android phone in the Falklands.

Investors became desperate to follow privately held SpaceX into orbit. More than half a dozen space ventures came public through mergers with special purpose acquisition corporations, or SPACs, in 2021. One of them, AST SpaceMobile, was founded by veteran satellite entrepreneur Abel Avellan. AST promised more than text: the first global satellite broadband for off-the-shelf cellphones.

At an August trade show in 2022, Musk joined T-Mobile to announce that a new generation of Starlink satellites would offer cellular coverage across the U.S., in addition to Starlink’s home internet service. Then Apple surprised everyone the next month with the cellphone industry’s first satellite service: Each iPhone 14 had free emergency messaging that used Globalstar’s satellites and frequencies.

Eager to keep America in the lead of the new direct-to-cell technologies, the Federal Communications Commission proposed regulations in 2023 to let satellite firms use the frequencies reserved for cellphones, if they made a deal with the cell carrier licensed for the frequency. Once approved, T-Mobile customers’ unmodified phones will work with SpaceX’s Starlink, while AST satellites will service the phones of partners Verizon and AT&T.

“The new rules were written with us in mind,” AST President Scott Wisniewski tells Barron’s. After the FCC created a dedicated Space Bureau, then completed its regulations for Supplemental Coverage from Space last year, AST moved its satellite licenses from Papua New Guinea to the U.S.

AST didn’t launch its first five commercial satellites until September 2024, seven years after the company’s formation. In November, the company announced agreements to launch as many as 60 satellites to cover key markets such as the U.S., Europe, and Japan.

The 2025 and 2026 launch program will use rockets from SpaceX, the Jeff Bezos rocket company Blue Origin, and the Indian Space Research Organization. With a 700-square-foot antenna, AST’s satellites will be among the largest commercial communications arrays in low Earth orbit. The company bets that its fewer, but bigger, satellites can reach cellphones better than the legions of smaller satellites flown by SpaceX.

AST’s big satellites cost a lot: from $19 million to $21 million each.

Wisniewski says the company’s five orbiting satellites could provide a total of 30 minutes of coverage a day for any particular location. For half-time coverage of the U.S. and Europe, AST will require 20 more satellites. A total of 40 to 50 satellites will be needed to deliver coverage around the clock.

At $20 million apiece, building and launching 50 satellites would use up the $1 billion in cash that AST now has on its balance sheet; the company must also fund $100 million or more in annual operating losses. The full constellation of nearly 250 satellites, for which AST has sought FCC approval, could cost about $4.9 billion, not counting operating expenses.

For a company with a $7.2 billion enterprise value, raising the money for a satellite fleet will dilute shareholders materially, at today’s $28 stock price. The stock showed its sensitivity to dilutive capital raises when it dropped 18% a few weeks ago on AST’s announcement of a $460 million convertible note offering that could convert to 3% of its shares outstanding.

Wisniewski said an initial fleet of 20 satellites providing half a day’s service should be enough to get AST to break-even cash flow. “With 40 to 50 satellites, we feel we will be very much on our front foot and positioned to win,” says Wisniewski. “We’ll add more, but it will be demand based.”

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To make a case for the billions that AST must raise for its satellites, bulls say that it will find millions of users. Deutsche Bank’s Bryan Kraft is the biggest optimist, justifying his Street-high $53 target price for the stock with a projection for nearly $5 billion in yearly revenue by 2030.

He predicts that 12 million people will subscribe for supplemental satellite cell service at $10 a month, with another 300 million paying $5 a day for occasional day passes. Some 125 million others in the developing nations will pay $1 a month to use AST satellites as their primary broadband connection, Kraft believes.

AST hasn’t yet said exactly how much it intends to charge for its supplemental service, although executives have spoken of monthly subscription fees in the $10 to $15 range, with revenue split equally between the company and its carrier partners.

“We think there is a ton of demand,” says Wisniewski.

But those forecasts for AST’s subscribers and pricing might not be easy to achieve, given the extent of terrestrial coverage and the competition from Starlink and others.

Dead zones exist, but nearly 97% of U.S. households now have access to terrestrial 5G broadband service, according to the FCC’s year-end 2024 report on the communications marketplace. Household access to 5G in the United Kingdom is only about 80%, but close to 100% in most of Europe’s affluent countries. The prior-generation broadband service called 4G LTE has even wider coverage.

The question for satellite phone subscriptions is: How much time do those households spend beyond cell tower reach? Studying that question globally, the wireless researchers at Opensignal found that subscribers in the U.S. and the U.K. spend 1% of their time in places with no tower signal.

As for price levels, the FCC report shows that mobile broadband prices in Germany match those in the U.S. but are cheaper in France and Italy, and far cheaper in the U.K. and Spain. A $10 add-on subscription might be hard to sell abroad.

However large the total market proves for satellite phone service, AST’s pricing power will also face competition.

Apple’s free iPhone satellite service, available since 2022, can send only terse SOS messages and the phone’s location to friends and emergency responders. But Apple thinks enough of the feature to have supplied $1.7 billion in financing to Globalstar. That gives Apple 20% ownership of Globalstar’s direct-to-cell service, and covers most of the cost of upgrading satellites and ground stations to allow expanded services in the next couple of years.

Musk’s SpaceX is ready to roll. T-Mobile says Starlink service will be included free in its best wireless plans, once beta tests end in July. Lower-tier plans can add satellite coverage for $15 a month, or $10 for those who take part in the beta trial. Even Verizon and AT&T customers will be able to have the service for $20 a month.

T-Mobile Starlink will be text-messaging at first, said T-Mobile CEO Mike Sievert in the company’s Super Bowl announcement. Picture messages, data, and voice calls will follow.

Starlink’s coverage will be hard for other satellite networks to match. It has launched more than 350 satellites equipped for direct-to-cellphone service, and plans to double that number by mid-2025. SpaceX rockets can carry 60 of the birds per launch, and the FCC has given permission for up to 7,500 of the new-generation satellites. Ultimately, Starlink sees its constellation growing to 40,000.

After several years of delay, Amazon is also entering the internet space race, with FCC approval to launch over 3,200 satellites for its Project Kuiper. It has committed over $10 billion. Amazon has told regulators it is exploring options for direct-to-cell services.

“[AST executives] have to say they’re going to offer something orders of magnitude better than those services if they’re going to try and charge for it. Because if [another service] is free, they’re screwed,” says Tim Farrar, a telecom industry analyst and consultant in satellite communications.

AST’s Wisniewski is confident that the company’s broadband service will prove more valuable than the lower-grade service of rivals. Amazon said it wasn’t yet ready to talk about its Kuiper plans. SpaceX didn’t respond to requests for comment.

AST is progressing. In January, its British partner, Vodafone, demonstrated what it claimed was a “world’s first” video satellite call though AST satellites to a standard smartphone on a Welsh hilltop with no terrestrial coverage. In late January, the FCC authorized AT&T and Verizon to start testing AST’s service on a few thousand phones each.

Providing voice service and some video to a demonstration phone is one thing. Serving up 5G-quality broadband concurrently to thousands of moving phones is a technical challenge.

“A modern cellphone is essentially an underpowered, poorly located satellite antenna for a cell tower in space,” said Sara Spangelo, the co-leader of SpaceX’s direct-to-cell program, at a conference a few years back. To better reach cellphones, SpaceX has asked the FCC to let Starlink satellites transmit at higher power and with narrower safeguards protecting neighboring frequencies from interference.

In common with other stocks that came to the market via SPAC deals, AST has a strong retail investor following. Some institutional fans recognize there is a degree of risk. AST is the single biggest holding in the Hennessy Focus fund, a high-conviction concentrated portfolio run by California-based Hennessy Funds. It recently removed a warning about the potential for a “complete capital loss” on the investment, but still classifies it as a “special situation.”

Others remain skeptical. Some 27% of AST’s free-trading shares have been sold short by those betting the stock will drop.

So far, AST SpaceMobile’s celestial broadband quest has defied skeptics. Some of the world’s biggest carriers have bought in, and five functioning satellites now fly overhead. For its numbers to work—not to mention its stock—it will have to find millions of callers willing to pay a premium above what rivals like SpaceX charge.