Satellite-to-cellular connectivity in remote locations is suddenly all the rage in telecoms again, some 23 years after Iridium and ICO Communications went bankrupt. Are satellite-based smartphone services coming out Apple (AAPL), T Mobile USA (TMUS) and possibly others this time prove more commercially viable?
Recent announcements from Apple and T-Mobile relate to text-based services targeting ultra-rural and sparse dead areas with no cellular service. Apple has a partnership with global star (GSAT), while T-Mobile tapped into Elon Musk’s SpaceX and its Starlink satellite constellation.
Others in the race for satellite-to-smartphone connectivity are Iridium Communications (IRDM), a successor to the bankrupt company; AST SpaceMobile; Lynk Global and possibly Viasat (VSAT) or Amazon.com‘s (AMZN) Project Kuiper.
With the launch of new iPhones in September, Apple announced a new Emergency SOS service that uses Globalstar’s satellite network. Demand for new iPhone 14 models is key for AAPL stocks. Like T-Mobile, Apple’s satellite-to-phone service will offer text messaging instead of voice calls.
In 1999 there were no smartphones
T-Mobile and others plan to expand smartphone connectivity to satellite voice and data services over time. This is no small feat as the original Iridium learned the hard way. Its bulky, specialized cell phones cost up to $3,500 with voice call rates of $7 per minute. Motorola and other investors spent around $5 billion on the doomed Iridium network.
However, Apple and T-Mobile plan to make their satellite-based services available on regular smartphones. Apple’s service is free for iPhone 14 buyers for two years.
“In the late 1990s, the focus was really on voice calling, and texting was an afterthought as it didn’t become a big part of the terrestrial mobile experience until the mid-2000s,” said Tim Farrar, analyst and consultant at TMF Associates.
“Now most people make far fewer voice calls and just like to communicate via text, so the burden on the device to support this type of communication is much less,” he added. “This has made it possible to integrate the technology into the latest iPhone without a large external antenna on the phone.”
Globalstar stock rose on the Apple announcement. However, some Wall Street analysts are cautious about the prospects for satellite-to-phone services.
Waiting for voice, data?
At Deutsche Bank, analyst Sidney Ho said of Apple’s Globalstar announcement, “It’s an interesting feature, but we believe usage will be limited until the feature supports voice and data, which will require significant infrastructure investments .”
Apple expects the emergency SOS service to be available by the end of 2022. Globalstar agreed to make 85% of its current network capacity available to iPhone users.
Apple has circumvented the need for a special type of antenna with custom components and software that help point iPhones in the right direction.
By 2026, Globalstar wants to have a new fleet of satellites in space with financial support from Apple. Apple reportedly committed $450 million to the company.
Meanwhile, Musk’s Starlink and T-Mobile aim to make their first text-based service available by the end of 2023. Musk has stated that their plans are “constrained by regulatory approvals.” TMUS stock is up 21% in 2022.
At Cowen, analyst Gregory Williams said in a report that the T-Mobile Starlink announcement falls short of the Holy Grail satellite phone. Other potential approaches “suffer from either capacity issues (data speed) or coverage issues, which is good for one, but not both,” Williams added.
More advanced satellite technology
The holy grail goal of delivering a true mobile experience over a satellite network is likely to prove elusive, he said.
“Unfortunately, the physics make this challenging, if not impossible,” Williams said. Technical challenges include Doppler shifts – high-frequency changes caused by fast-moving objects. Starlink satellites, for example, fly overhead at 18,000 miles per hour.
Attaching large antennas to smartphones is not an option. But next-generation satellites in low-Earth orbit could improve performance.
Farrar told IBD that delivering voice calls or high-speed data to smartphones could work if LEO satellites were equipped with much larger antennas.
This is an approach that the startup AST SpaceMobile is pursuing. Among the investors is the maker of cell towers American tower (AMT) and Vodafone from Great Britain. And, AT&T (T) AST has allowed SpaceMobile to use part of its radio spectrum for testing. According to a Bloomberg report, AT&T says it is ahead of T-Mobile on getting regulatory approval.
Analysts expect AST SpaceMobile to launch its first operational satellite in late 2023.
Meanwhile, SpaceX plans to add T-Mobile spectrum antennas to its next-generation satellites. The Starlink V2 satellites will feature larger, more powerful phased array antennas. SpaceX plans to launch Starlink V2 satellites into orbit by 2023.
Another player could be Viasat, which is in the process of acquiring satellite company Inmarsat.
Iridium next big announcement?
After Viasat agreed to sell its military business to L3Harris for $1.96 billion on October 3
Meanwhile, Iridium announced in late July that it had reached a development agreement with the unnamed company.
At Raymond James, in a report following the launch of Apple’s iPhone 14, analyst Ric Prentiss said: “We believe the next big announcement will come from Iridium, which in particular is the only recent initiative utilizing a full constellation that is already full used in space.”
GarminThe inReach satellite subscription service (GRMN) uses Iridium’s network. Garmin sells GPS communicators in the $300 to $600 price range.
Meanwhile, the assets of Iridium LLC were sold to a private holding company for $25 million in 2001. A reborn Iridium Communications went public in 2008 through a merger with GHL Acquisition, an Amex-listed special purpose acquisition company.
Additionally, Iridium stock now has a market valuation of approximately $5.8 billion.
Iridium sells wholesale data services. While the U.S. government is its largest customer, Iridium says it has nearly 2 million subscribers in aviation, shipping and other industries.
UK-based Bullitt plans satellite messaging smartphone
For the June quarter, earnings per share for IRDM stock rose 33% to 4 cents, while revenue rose 17% to $175 million. IRDM stock is up 11% in 2022.
Apple isn’t the only device maker aiming for satellite connectivity. alphabet‘s (GOOGL) Google and China’s Huawei also have projects underway.
There’s also UK-based Bullitt Communications, which currently sells rugged cell phones. Bullitt has announced plans to launch a satellite messaging smartphone in early 2023.
Commercial services aside, there are good reasons for satellite companies to strive for smartphone connectivity. For one, according to a Morgan Stanley report, nearly 20% of the US is not covered by terrestrial cellular networks. First responder units could benefit in emergencies. Conventional mobile phone networks could also fail in the event of a disaster.
Follow Reinhard Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
YOU MAY ALSO LIKE:
Learn how to time the market with IBD’s ETF market strategy
Bear market news and how to deal with a market correction
How to use the 10 week moving average for buying and selling