Remember what happened to Tom Hanks in “Cast Away”? Stranded on an uninhabited island after his plane crashed in the South Pacific, Hanks struggled to reconnect to the outside world and was left with Wilson (a volleyball) as his only companion. Had one of his FedEx packages contained the new iPhone 14, it would have been a totally different story.
Emergency SOS is becoming a reality, as demonstrated by Apple’s new partnership with Globalstar, a satellite connectivity operator. By simply pointing the iPhone 14 to the sky in remote areas typically without cellular coverage, you will be able to receive signals beaming down from space and send emergency alerts.
Demand for connectivity is ever increasing across the globe. Yet, despite the rapid expansion of terrestrial infrastructure over the past few decades, only 25% of the earth’s land mass is covered by cell phone signals, not to mention vast stretches of ocean, which account for 71% of the earth’s surface. It remains a big pain point for industry players who have been struggling to cover these areas with traditional terrestrial cellular technology, largely due to land-use restrictions, terrain limits and sheer vastness. The rising frequency and intensity of natural disasters that take down traditional cellular networks also adds to the urgency of having a backup communication network.
This is where satellite communication comes in. Traditionally independent of mobile networks, the situation is quickly changing with technology advancements such as the new generation of Low Earth Orbit (LEO) satellites. Integration of LEO satellites with 5G networks is set to become a crucial supplement to terrestrial communications. Beyond just emergency situations, satellites built with 5G architecture will enable ubiquitous connectivity in moving cars, trains, planes and drones, anywhere and anytime.
Market players are racing to put 5G in space to eliminate mobile dead zones on Earth. T-Mobile announced its collaboration with SpaceX to provide satellite-to-cellular service to consumers, integrating the second-gen Starlink LEO satellites and T-Mobile's nationwide mid-band 5G spectrum. In China, Huawei has announced similar services in its flagship Mate 50 series smartphones enabled by Beidou, the country’s own navigation system. Use-cases of space networks goes beyond just the consumer. For one, the agriculture industry is turning to satellite services to deliver always-on and connected solutions. We believe this is just the beginning of the convergence of satellite communication and 5G networks. As more companies enter the playing field, an increasing range of options for satellite communication will emerge. As one of the first movers in this space, we believe that T-Mobile and John Deere will be key beneficiaries of the development in satellite networks.
T-Mobile
Unlimited Service, Ubiquitous Coverage
T-Mobile is one of the largest telecom carriers in the U.S., with 110mn customers. Founded in 1994, T-Mobile provides wireless voice and data services under T-Mobile and Metro brands. 48% owned by Deutsche Telecom, T-Mobile largely improved its positioning in 2020 when it merged with Sprint, gaining scale and network spectrum that allowed it to be a leader in the 5G era.
Known as the un-carrier, T-Mobile has been taking share and growing its market through unconventional ways. The company’s competitive advantage lies in its simplified pricing of equipment and data plans that include unlimited data at lower costs and doing away with annual costs and contracts. Such disruptive measures encouraged consumers to switch to and stay with the carrier, which led to rising service revenue growth over time.
We believe T-Mobile’s 5G leadership and greater scale pave the way for further share gains. Having invested heavily in spectrum, T-Mobile is now reaping the rewards of greatly improved network quality. Since it acquired the 2.5 GHz assets from Sprint, T-Mobile has pursued a multilayer spectrum portfolio that offers depth and breadth, and now has the largest, fastest and most reliable 5G network in the U.S. The goal is to cover 300mn people by the end of 2023. Setting T-Mobile further apart from peers, its recently announced partnership with SpaceX adds a new layer of coverage beyond terrestrial networks and would develop new 5G use cases over time.
Several growth drivers in coming years include fixed-wireless broadband and expansion into unpenetrated smaller markets within the U.S., which are home to 40% of the U.S. population. The aim is to have 7 – 8mn fixed-wireless access subscribers by 2025, which may generate US$4.5bn in annual revenue (assuming average monthly revenue of $50 per user). Beyond this solid potential growth, management’s long-term goal of up to US$60bn in share repurchases reflects T-Mobile’s confidence in the strength of its business.
John Deere
Working Smarter with Connected Machines
John Deere is one of the world’s largest agriculture machinery companies. It has over 180 years of experience manufacturing agricultural equipment such as tractors, harvesters, planters and sprayers. Having invested steadily in automation and machine intelligence, Deere’s machines are now intelligent, connected, and have harnessed terabytes of precision data. The company has 300,000 of its machines connected to terrestrial cellular networks that provide farmers with agronomic data.
Deere’s end-to-end solution is a holistic one – from the machines that perform the farming task and gather data, to the connectivity for data sharing, and to the analytical tools for improving productivity. The John Deere Operations Center (JDOC), an online farm management system, enables access to farm information from anywhere and allows farmers to conduct analytics and formulate prescriptions for their fields. This allows farmers to “know” their crops and fields better, ultimately making each farming task smarter than the preceding one.
Connectivity provides a critical foundation for precision agriculture technologies. Since 2011, Deere began connecting all of its new production agriculture equipment with cellular networks. However, these can only be used in real-time and where there is network coverage. Deere wants to change that by working with the satellite industry and has issued an RFP to explore viable solutions. Management believes that equipping machines with a satellite solution is the next step toward a multi-mode connectivity environment, which would mean a broader reach for its precision farming and other data-driven solutions.
Such initiatives will unlock new economics for the satellite industry – Deere alone puts the market opportunity for the satellite industry at 5,000 new machines annually that could be equipped with a satellite solution and about 40,000 existing machines for retrofit. Supporting this, Deere estimates that in developed areas like North America, 70% of the arable land is connected to an internet signal, which compares to emerging economies like Brazil where the number is only 20%. With better connectivity both in space and on the ground, we believe the opportunity set is widening for companies across industries.
