ASTS - Iridium: Facing A Shifting Competitive Landscape
2024-07-03 08:51:09 ET
Summary
- Iridium Communications is a provider of satellite communications offering solid growth and strong cash flows.
- In addition to voice and data user growth, IoT, direct-to-device services and time synchronization and location services are all growth opportunities.
- Competition from new entrants, like SpaceX and AST SpaceMobile could create pricing pressure. Iridium's technology and focus on high value use cases may insulate it from this somewhat though.
- While Iridium appears attractively priced on a cash flow basis, some of this is due to a lack of investment at the moment.
Iridium Communications ( IRDM ) is a provider of LEO (Low Earth Orbit) satellite communications that has traditionally focused on voice and SMS but has more recently expanded into areas like data, ADS-B, and satellite-based time synchronization and location services. Iridium’s business is growing at a healthy pace and generating strong cash flows, although some of this is because its constellation was only fairly recently replaced, resulting in a CapEx holiday. While Iridium’s fundamentals appear to justify a high valuation, there is a question of what the pending surge in supply from companies like SpaceX and AST SpaceMobile ( ASTS ) will do to the market. Iridium believes that its offering is differentiated but it seems reasonable to expect a meaningful negative impact in coming years.
Market
Communications industry sectors include:
- Mobile satellite services - provide customers with voice and data connectivity using ground facilities and a network of satellites. Mobile satellite services are more focused on voice and data services.
- Fixed satellite services - typically use GEO satellites to provide customers with broadband communications links between fixed points on the earth’s surface. Use cases include video and high-speed data customers and international telephone markets.
- Terrestrial services - use a network of land-based equipment to provide wireless or wireline connectivity.