u/PalladiumCH

Why the bears are getting it wrong on how the new ATT VZ TM cartel will be crushing $ASTS margins and why or why AST could just as well be headquarted in Switzerland.

Lets start with the key flaw in the “AT&T / Verizon / T-Mobile crush AST margins” thesis

The idea of the 3 Large Telcos compressing AST margin is assuming satellite connectivity permanently behaves like a commodity wholesale market. Historically, telecom infrastructure does not work that way once capacity becomes multi-use.

Capacity always migrates toward the highest-value yield. Airlines prioritise business class, AWS prioritises AI workloads, and subsea operators prioritise traffic. The same dynamic likely applies here.

So even if MNOs negotiate aggressively on consumer connectivity, AST can redirect incremental capacity toward:
• defence and government resilience
• industrial IoT / M2M
• maritime and aviation
• enterprise continuity
• hyperscaler backhaul
• direct ecosystem partnerships with Apple or Google for emergency and Android satellite services

The “3 carriers control AST” narrative also ignores that infrastructure markets rarely stay buyer-dominated forever.

Tower companies, data centres, cloud infrastructure, app stores, and subsea cable operators all eventually gained leverage because they became:
• hard to replicate
• embedded into ecosystems
• strategically necessary
• economically irrational to duplicate

And that last point is critical: A shared orbital layer may simply become the economically rational outcome for the industry. And if not fully for 5G then for 6G coming up to 2030 as CatSE already outlined.

Duplicating several global D2D constellations with overlapping coverage could become massively capital inefficient, very similar to how telecom evolved toward:
• shared towers
• roaming agreements
• fibre backbones
• neutral interconnection infrastructure

AST may initially look like a supplier to carriers, but over time it could evolve into a neutral connectivity layer sitting between multiple ecosystems:
• carriers
• governments
• defence
• OEMs
• hyperscalers
• automotive
• logistics
• emergency services

And that is essentially the “Switzerland of D2D” framework

or more fancy

AST is the neutral infrastructure for the global telecom industry.

Neutral? yes, you only have to look to Switzerland to understand how valuable neutrality can become over time resulting amongst other things in the Swiss franc existing continuously since 1850. Remarkably, Swiss coins minted in 1850 are still technically legal tender today.

And even among the very small group of currencies with exceptional continuity such as the US dollar (1792), Japanese yen (1871), Swedish krona (1873) and Norwegian krone (1875), the Swiss franc remains unusually unique due to its uninterrupted neutrality and institutional continuity through both World Wars.

Welcome to the “Switzerland of D2D” framework ;)

p.s.

Some other examples of valuable infrastructure layers in history:

• DNS
• SWIFT
• payment clearing
• rail gauge standards
• cloud interconnection
• electricity grids

https://preview.redd.it/m5l4d5rifr2h1.png?width=1280&format=png&auto=webp&s=ba3660ec07880eb69cce75c321069b8f8a5d04a0

Adding 10 cents (yes Inflation is real) to the great read from TheRealSalDePaol on Satellite economics and emerging markets in Africa and why the ARPU might turn out higher than expected.

His take: "The bears are repeating McKinsey's 1980 mistake. When AT&T broke up, McKinsey predicted just 1 million mobile users by 2000. Actual figure: 100 million. Off by 100x. They modelled today's prices and willingness to pay, missing how better tech, falling prices, and connectivity spark economic growth and demand.ASTS bears are doing the same: "Africa can't afford it", "ARPU too low". Wrong question. The cycle from 2G to 5G proves phones improve, speeds rise, prices drop, incomes grow, and usage explodes.What sets AST apart: once the constellation is built (funded by their $3.5B balance sheet), marginal cost to serve anywhere is zero. Satellites fly overhead anyway. A rural Nigerian paying $0.10/month with 10 million others means pure profit. No towers, no fibre needed.That's why the 3 billion addressable market understates it. AST can profitably serve millions who pay nothing today because terrestrial networks were never viable there. No traditional player can match that maths."

My point: There's way more upside to that $0.10/month per user

Two reasons: GDP per capita growth and the share of disposable income spent on communication

Lets look at some ARPU data from Safaricom and MTN:

Safaricom Ethiopia Usage is rising strongly, ARPU is increasing simultaneously, and penetration is still early. Exactly the kind of telecom adoption curve that historically leads analysts to underestimate long term demand growth. 1 USD ≈ 156 ETB

MTN data shows Nigeria’s ARPU is already $2.09 and MTN is posting strong growth: +22.7% service revenue, +36.4% data revenue, +23.2% fintech

Safaricom Kenia 2025 active customer base growing 7.1% to 37.1 million, mobile data revenue up +15.2% with usage per subscriber up 13.9% to 4.22GB. Highly relevant for AST is the 4G device adoption rate of for smartphones +19.4%, 4G devices +32.4%, 5G +57%

The faster emerging markets upgrade from basic/feature phones to 4G/5G smartphones, the larger and more valuable the D2D opportunity becomes for ASTS. That’s exactly why the device adoption stats in Safaricom’s results along smartphones +19%, 4G +32%, 5G +57% are such a big green flag.

Now what about GDP per capita growth for Kenia, Ethiopia and Nigeria?

Even after adjusting for rapid population growth, Kenya is still generating roughly ~3–4% real GDP per capita growth, Ethiopia ~3–5%

For Nigeria rapid population growth has suppressed GDP per capita growth as the population exploded from 56 million to over 230 million since 1970s. GDP per capita has remained volatile rising to peaks of roughly $2,000–$3,000 before recently falling back to around $1,000–$1,500 due to currency devaluation and inflation.

Nigeria’s total economy has grown roughly 20–30x in nominal US dollar terms over the past ~55 years. It went from a small ~$12.5 billion economy in 1970 to one of Africa’s largest, currently ranking around 48th–53rd in the world.

For ASTS, fast population growth in places like Nigeria could hold back ARPU in the short term because of lower GDP per capita. But over the long run, it creates a massive subscriber opportunity as more people get smartphones and rely on mobile connectivity.The real bull case for D2D in Africa isn’t ARPU. It’s about huge subscriber numbers, almost zero extra cost to add more users and steadily rising data usage.

https://preview.redd.it/butn1mzuh21h1.jpg?width=805&format=pjpg&auto=webp&s=4154d02a84b17985661f98432a396995c4419d1f

Wrapping up this post one final thought on cost per GB across Africa. Yes these are old stats from 2022 showing you just how much progress has been made in 2026

https://preview.redd.it/rdmkr2hre21h1.jpg?width=757&format=pjpg&auto=webp&s=49f24b08716cbb81094ab0dd10f4e6c8f8321d21

Mobile data prices across key markets have fallen sharply. In 2025 Nigeria now sits at a ~ $0.39 per GB, Kenya range is around $0.50 to $1.00, and Ethiopia at ~$0.43 to $0.68 per GB. Trend in pricing is downward, making data more accessible while usage and device adoption keep climbing fast.

Now you can argue what is the perfect setup for ASTS, High ARPU or High adoption rate? As AST has near-zero marginal cost for serving those markets its satellite network can monetize places where terrestrial economics fail. And we have the partnerships with the MNOs. Operators like Safaricom and MTN can use AST to optimise their own networks aggressively on both capex and opex:

• Shut down or remove expensive rural low-usage towers entirely
• Turn towers off at night when traffic is dead
• Use AST as a smart capacity extension in busy areas
• Be far more selective about rolling out 5G and future 6G upgrades

In short, AST adds coverage and lets MNOs run leaner, cheaper, and more profitable terrestrial networks while servecing unprofitable markets at almost zero extra cost. This is exactly why the bears’ “low ARPU = bad” take completely misses the point.

And yes capacity constraints still matter which is why AST will leverage classic yield management, pricing power, and prioritising the highest value traffic.

Exciting times ahead for our D2D team from Midland Texas.

Links:

https://x.com/DepaolaSal/status/2054633815969083397?s=20

https://mtn-investor.com/fy-2025-reporting-suite/pdf/mtn-fy25-integrated-report-2025.pdf

https://www.safaricom.co.ke/annualreport_2025/the-commercial-value-we-deliver/safaricom-ethiopia-performance-review/

https://www.safaricom.co.ke/annualreport_2025/the-commercial-value-we-deliver/safaricom-kenya-performance-review/#1754653257700-87780926-9dbc

https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=KE

https://www.statista.com/chart/29144/cost-of-mobile-data-in-africa/?srsltid=AfmBOoovopXCBOagq-01dsaR_C05PMTeCWB6dihrXbg_LYf06yKQfzay

https://preview.redd.it/5bz57sibe21h1.jpg?width=1111&format=pjpg&auto=webp&s=3206a7eb4715dd5e990732d3aa3364ef2a818746