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Satellite/Telecommunications Sector Insights: Ligado-AST Transaction Continues Dealmaking Around Key MSS Bands as Trump Administration Arrives; EchoStar Well-Positioned for Multibillion-Dollar D2D Partnership

Direct-to-Device Services
EchoStar Partnership
MSS Spectrum
Satellite Telecommunications
SpaceX Innovation
Credit Research: Adam Rhodes, CFA

 

Key Takeaways:
 

  • In Octus’ view, the AST-Ligado transaction represents the most recent market validation of the standards-based mobile satellite service, or MSS, model for direct-to-device, or D2D, services, even as AST will face complexities in providing a global MSS D2D offering.
 
  • The Ligado-AST announcement coincides with a change in administration in Washington, which Octus expects will spur a heightened dealmaking environment in the space and telecommunications sectors, and follows Globalstar’s recent announcement that it would be expanding its multibillion-dollar proprietary MSS partnership with Apple, which was initially announced in 2022.
 
  • In our view, three globally harmonized pairs of lower mid-band spectrum bands are most ideal for global D2D offerings. Apple’s Globalstar partnership accounts for the Big LEO band pair and AST’s Ligado deal partially accounts for a L-band paired band, leaving the S-band pair, largely dominated by EchoStar, as the most viable for standards-based D2D services.
 
  • We believe that EchoStar is well-positioned to strike a partnership, or more expansive deal, with a LEO constellation operator, such as SpaceX or Amazon’s Project Kuiper, which, based on precedents, could represent a major opportunity worth potentially billions of dollars.
 

Ligado Networks’ chapter 11 bankruptcy filing on Jan. 5 is the latest chapter in the company’s long-running saga under which it has sought terrestrial usage rights for certain of its spectrum holdings, which saw it previously in bankruptcy from 2012 to 2015 under its prior name, LightSquared.

Although the company’s travails in obtaining terrestrial spectrum rights have driven market attention and are the subject of Ligado’s ongoing $39 billion takings suit against the U.S. government, its restructuring support agreement is centered on the monetization of its U.S. and Canada L-band mobile satellite service, or MSS, spectrum assets. These assets, shown below, would be provided to emerging direct-to-device satellite constellation operator AST SpaceMobile under a long-term strategic commercial agreement.
 

Source: Company reports, regulatory filings and Octus analysis
(Click HERE to enlarge.)

The companies announced the transaction on the cusp of the inauguration of the Trump administration, which we expect will usher in an accelerated deal-making environment in space, telecommunications and beyond. Highlighting the FCC’s focus on these areas in the new administration, on his first day, Chairman Brendan Carr emphasized that the Commission has “important work ahead” on “unleashing new opportunities for jobs and growth through agency actions on spectrum, infrastructure, and the space economy.”

As the nascent D2D satellite services market quickly takes shape, companies are pursuing two distinct approaches. Some companies plan to provide these services with mobile satellite services, or MSS, spectrum authorized primarily for communications between “mobile earth stations” and satellites. Others, enabled in the U.S. with the FCC’s March 2024 Supplemental Coverage from Space (SCS) order, aim to provide these services with spectrum primarily authorized for terrestrial use, with D2D services provided on a supplementary, secondary basis.

The Ligado announcement marked a strategic pivot for AST in our opinion, tilting the company’s approach toward a standards-based MSS strategy rather than the terrestrial band alternative, which, in our view, represents the most recent market validation of the strategic rationale in delivering D2D services via MSS spectrum.

The Ligado-AST deal would account for the U.S. and Canada rights of what is, in our view, one of the three most currently viable globally harmonized MSS bands for D2D services. Overall, the United Nations’ International Telecommunication Union, or ITU, has authorized primary MSS in four paired bands (downlink and uplink) within the larger L- and S-bands, which are known to have favorable propagation characteristics for unmodified devices. The lowest bandwidth of these four paired bands appears to be utilized for other, non-MSS, purposes in the U.S. and Octus is not aware of meaningful international MSS use of the bands.

A summary of these primary MSS spectrum bands is shown below. The table includes certain license holders and 3rd Generation Partnership Project, or 3GPP, non-terrestrial network (NTN) band designations. The 3GPP is the major mobile telecommunications standards body facilitating industry compatibility and adoption of bands in the mobile equipment ecosystem.
 

(Click HERE to enlarge.)
 

The announcement of the Ligado-AST partnership follows Globalstar’s recent announcement that it would be expanding its multibillion-dollar proprietary MSS partnership with Apple, which was initially announced in 2022. The AST deal would partially keep one of the three aforementioned, albeit, in our view, challenged, globally harmonized low mid-band MSS spectrum bands out of the hands of expanding rivals, such as SpaceX and Amazon’s Project Kuiper, with the S-band, largely dominated by EchoStar, continuing to remain as the most viable for standards-based D2D services.

Ligado’s MSS rights, which cover just the U.S. and Canada, are subject to a disputed cooperation agreement with Viasat’s Inmarsat under which Ligado is delinquent on required payments. To access similar MSS rights on a global basis, AST will need to negotiate such rights with Viasat, which uses its holdings for maritime, aeronautical and military purposes, among others.

In Octus’ view, EchoStar, with its sizable global S-band rights, is the most prominent holder of exclusive, “primarily unused” internationally harmonized MSS spectrum. On the company’s third-quarter earnings call, EchoStar CEO Hamid Akhavan emphasized his belief that other MSS bands are encumbered with legacy services, requiring “optimizations and movements” to fully utilize the spectrum.

As D2D Transitions From Theory to Reality, Standards-Based MSS Appears to Provide Long-Term Advantage

While Globalstar and Iridium’s satellite phones have delivered connectivity for decades, against the backdrop of plummeting satellite delivery costs and proliferating satellite constellations, satellite connectivity is quickly coming to unmodified smartphones, albeit currently on a limited basis because of spectrum and technology constraints.

SpaceX, the space industry’s launch and low-earth-orbit constellation behemoth, completed the first orbital shell of its D2D constellation in early December, offering beta supplemental services to T-Mobile’s subscribers, on a secondary basis, with the carrier’s primary terrestrial-authorized PCS G-block spectrum, shortly thereafter. SpaceX’s Starlink has entered into similar partnerships with mobile network operators, or MNOs, around the globe.

Although SpaceX’s approximately 350 direct-to-cell-capable satellites in orbit may provide the operator with a meaningful first-mover advantage, similar to others pursuing a terrestrial spectrum D2D model, its current services rely on the use of MNO-held terrestrial spectrum, rather than more directly held authorizations.
 

(Click HERE to enlarge.)

We believe that SpaceX’s terrestrial band approach allowed it to more quickly enter the market, as these bands are already included in existing mobile devices’ chipsets, providing backwards compatibility. However, over the long term, delivering D2D services through dedicated MSS spectrum eliminates the need to bargain with MNOs worldwide for spectrum access, which likely requires a sacrifice of a certain amount of margin. In our opinion, beyond its superior control structure, the MSS strategy avoids additional challenges facing the terrestrial approach, such as certain cross-border, scaling (cost) and out-of-band interference/power challenges, allowing MNOs to maximize existing terrestrial infrastructure.

In Octus’ view, as low mid-band MSS frequencies gain continued standardization and incremental implementation into mobile devices, the commercial logic in D2D delivery with these bands will continue to grow. Relative to a proprietary approach, we also expect a standards-focused approach to yield better integration and interoperability for MNOs.

 

For example, even as Amazon’s planned 3,232-satellite LEO constellation Project Kuiper is not expected to include direct-to-device capabilities in its first generation of satellites, Amazon Project Kuiper’s Head of Business Development for Government Services, Rich Pang, has stressed that customers desire these services, saying the industry has to “figure out a better way of working toward standards.” Further, in a November 2024 U.K. Ofcom regulatory filing, Amazon stated that it is “exploring options for D2D services and is seeking to develop the most versatile technical solutions for D2D offerings.” Contrasting with Apple’s approach, Pang has noted that users want interoperability and are “getting tired of the proprietary systems.”

Iridium CEO Matt Desch at a recent conference echoed similar sentiments, noting MNO and chip manufacturers’ preference for standardization, which provides manufacturing scale and means the ecosystem is “not tied necessarily down forever.”

In November 2023, Qualcomm scrapped its proprietary approach to D2D that it was jointly pursuing with Iridium. Since then, Iridium has pivoted to a standards-based approach called “Project Stardust.” In September, the company announced that 3GPP accepted its request to extend the functionality of “Narrowband Internet of Things (NB-IoT) for Non-Terrestrial Networks (NTN)” into the work plan for 3GPP release 19, which was scheduled to be completed in the fourth quarter of 2025.

Other D2D market participants include:
 

  • Skylo: The company is pursuing a strategy using its partners’ existing geostationary satellites to offer SOS messaging services, which are available on the Samsung Galaxy S25 series and Google Pixel 9 series phones in the U.S..
 
  • Lynk Global: The company has a terrestrial spectrum strategy with five LEO satellites in orbit. Lynk and Slam Corp., a special purpose acquisition company founded by former MLB third baseman Alex Rodriguez, announced a combination in February 2024 that has been repeatedly extended and currently faces a June 30, 2025 termination date.
 

Further MSS-Related Dealmaking Expected Amid Constrained Supply; Ultimate Market Size Difficult to Predict

With proliferating satellite constellations and expected increasing interest in ubiquitous connectivity, Octus expects that demand for lower mid-band MSS spectrum will continue to grow. However, this spectrum is scarce, and the lead time for dedicating additional bands for these purposes is a lengthy process, requiring the authorization of global, supranational and national regulatory bodies. On the global level, the ITU only convenes its main decision-making body once every four years.

In our view, the ultimate size of the global D2D services market is difficult to predict. Upon the December launch of its Starlink D2D services in beta-mode, T-Mobile did not charge postpaid customers, but we expect that subscribers are likely to grow to expect this coverage with this additional service becoming table stakes for future networks.

Importantly, we believe that there will be a limited number of winners in providing these services on a global basis, with first movers conferred company-specific and national strategic advantages. Similar to other technologies, the existence of such services will generate use cases over time, in our view.

Using very round numbers, in October 2024, EchoStar’s Akhavan suggested a $3 billion per annum initial global D2D market size to CNBC, stating, “Let’s pick a number, say 250 million of the 8 billion people that live on Earth. [If] 250 million [people] pay a dollar a month for [D2D service], that’s 250 million a month times 12.”

EchoStar Well-Positioned to Strike a Multibillion-Dollar S-Band Partnership

Demonstrating its interest in MSS spectrum, SpaceX has sought to gain access to both EchoStar and Globalstar’s MSS holdings through applications to the FCC. Although the Commission denied SpaceX’s applications to access this spectrum in March 2024, it subsequently published parallel requests for comments on separate SpaceX petitions for rulemaking to “modernize” the rules related to EchoStar and Globalstar’s MSS holdings.

SpaceX’s efforts on this have been unsuccessful thus far, with the pre-Carr commission in September granting EchoStar’s contingent 5G network build-out extension request, further entrenching the company’s use of its MSS spectrum in its terrestrial 5G network and providing Globalstar with a 15-year renewal of its MSS licenses in December.

Notably, under its contingent build-out extension, EchoStar committed to upgrading its 5G sites to align with 3GPP release 17 by June 14, 2025, specifically stating that this includes “wide-band mobile satellite service … that can promote connectivity around the country and world.”

EchoStar stated in an April 2024 FCC filing that the company is planning a nonterrestrial network linked to its S-band holdings “for 2026-2027.” However, in September, Akhavan emphasized his belief that it is better for EchoStar to “work with partners.” He added that this approach is “not … simply because of the capital availability, which is very important, but also from [the] perspective [that D2D] is a global offering, and you would like to have more participants … to advance its chance of success and deployment.”

With the arrival of the Trump administration and Carr on Jan. 20, we expect the regulatory regime to be more favorable for Elon Musk’s SpaceX. Carr, who was critical of the process under which the FCC granted the contingent extension of EchoStar’s final build-out milestones, has advocated for establishing “an aggressive timeline for agency action” for putting spectrum to use for commercial wireless services.

In Octus’ view and in light of EchoStar’s use of its MSS frequencies in its U.S. 5G network and those U.S. authorizations serving as collateral under the company’s new spectrum bonds, EchoStar appears best positioned to strike a partnership with a LEO constellation operator under which the partners can coordinate usage with EchoStar’s U.S. 5G network. EchoStar’s S-band MSS GEO satellite EchoStar XXI and related pan-European long range, or LoRa, IoT network employ its European S-band rights, but a partnership that accelerates further use could provide significant strategic value as EchoStar looks to renew its European Union S-band licenses in 2027.

We believe that SpaceX is a logical candidate for such a partnership, which, on the basis of the Apple and AST SpaceMobile transaction precedents, could represent a significant opportunity worth potentially billions of dollars. Alternatively, with its Project Kuiper constellation set to be deployed, Amazon might be a fit for a wide-ranging partnership that could include access to EchoStar’s cloud-native 5G network, which runs on Amazon’s AWS cloud services, and could ascribe a similar magnitude of value to EchoStar’s MSS holdings.

A comparison of the Globalstar-Apple and Ligado-AST partnerships as well as EchoStar’s MSS authorizations is shown below:
 

(Click HERE to enlarge.)

 

AST Makes the First Move on L-Band-Paired MSS Band, but Work Remains With Viasat, Regulators

Despite reaching its commercial agreement with Ligado, AST faces considerable complexity, in our opinion, as it seeks to employ Ligado’s MSS rights in a global non-geosynchronous orbit, or NGSO, satellite constellation. This includes:
 

  • Obtaining adequate FCC NGSO licenses: Currently, Ligado’s MSS rights under the FCC apply to its GEO satellite, SkyTerra-1, and, under the commercial agreement, AST can terminate the arrangement if the parties do not obtain “technically implementable NGSO FCC approvals” within 30 months of executing the transaction’s definitive agreements. The FCC’s approval must provide for power levels necessary to reach “3 bps/Hz in downlink, 2 bps/Hz on uplink on NGSO systems across the spectrum,” according to the AST term sheet.
 
  • Resolving the treatment of the Inmarsat cooperation agreement: Due to the unique structure of Ligado’s MSS holdings, which are tied to its cooperation agreement with Inmarsat, the parties will need to resolve the treatment of Ligado’s historic and go-forward payments to Inmarsat under the agreement, which are the subject of a dispute between the companies.
 
  • Negotiating additional international MSS rights with Viasat for global coverage: Further, Ligado’s current MSS rights only include authorizations in the United States and Canada. Inmarsat holds “leading global L-band spectrum rights,” according to Viasat CEO Mark Dankberg, that will likely be essential for AST to provide a global D2D offering through its NGSO constellation. As previously mentioned, Viasat/Inmarsat also employs its L-band holdings for certain incumbent uses.
 

Highlighting the complementary nature of both companies’ L-band holdings, both Ligado and Viasat are founding members of the Mobile Satellite Services Association, or MSSA, a Viasat-led consortium formed to advance global D2D and IoT services. The “underlying premise” of the 3GPP standards-aligned MSSA is to scale the D2D market by maximizing the “amount of bandwidth that’s available in the aggregate,” according to Dankberg.

In contrast, on EchoStar’s third-quarter call in November, Akhavan said that the company has not joined the MSSA since it has “access to adequate spectrum resources of [its] own, without having to partner with anybody.” He characterized the consortium as “a bit of a convoluted larger group” serving as “more of a spectrum availability partnership.”

Ligado stated in a bankruptcy filing that, prior to entering bankruptcy and reaching the transaction agreement with AST, it “engaged in conversations with several third parties [over] many months in an effort to find a strategic partner.” These conversations “in many instances, included Viasat,” according to the company.

Potentially leaving the door open for other bids during its potentially lengthy regulatory approval process, which can last up to 39 months before the effective date under the RSA, the proposed Ligado-AST agreement permits Ligado to execute an alternative transaction on or prior to the effective date, subject to a substantial breakup fee payable to AST.

The proposed breakup fee considerations payable to AST would include:
 

  • A $200 million cash fee;
  • Certain potential cost reimbursements related to the cooperation agreement and a separate Crown Castle lease agreement; and
  • A call option, with a penny strike price, for either $100 million in market value of new series A-1 preferred units or equity securities with an equivalent value thereof.
 

Additionally, $113 million in AST penny warrants paid to Ligado upon signing the AST transaction agreement would be canceled.

Under the RSA, any of the following parties can terminate the transaction:
 

  • Ligado;
  • The “Required Consenting First Lien Group Creditors”: A group that includes Apollo, Owl Creek, Capital Group and Oaktree; or
  • The “Required Consenting Crossholder Group Creditors”: A group that includes Fortress and Cerberus.
 

A hearing on the debtors’ proposed breakup fee and breakup reimbursements is scheduled for today, Jan. 27, with the U.S. trustee, at time of publication, filing the sole objection.

A detailed summary of the consideration provided to Ligado under the proposed Ligado-AST transaction is shown below:
 

(Click HERE to enlarge.)

A detailed summary of the consideration provided to AST under the proposed Ligado-AST transaction is shown below:
 

(Click HERE to enlarge.)