“On October 1st, This Weird Rooftop Pod Will Deliver the Death Blow to ‘The Big 3’ Cable Companies… With One Clean Shot”
That’s the opener of the latest ad for Ray Blanco’s Technology Profits Confidential, which is selling subscriptions with the promise that you can get rich and shut down America’s most hated companies at the same time. So what’s he talking about with this tale that you can “turn a single paycheck into $110,661 when America’s most hated monopoly finally goes six feet under?”
He doesn’t mention what kind of paycheck we’re talking about, of course, whether it’s $1,000 or $40,000 that turns into $110,000… but he does in several places talk up what “could” be a 5,349% windfall.
So where are these riches coming from? The short answer is “satellite internet,” which for many years has been the province of billionaires who are sick of having too much money.
But let’s get into the long answer so we can see if it’s clear which stock he’s teasing. Then, heck, maybe you’ll decide you’d like to risk a subscription… that’s your call. But start out with some knowledge first, if you don’t feel like you’re buying a “secret” stock tip and you can go into any newsletter subscription with a little healthy skepticism and the ability to think for yourself, then you’re much less likely to do something
stupid risky once you get that “secret tip.”
The big idea is that several large companies are backing a low-earth orbit constellation of satellites that could deliver broadband-speed internet to areas of the world that aren’t currently connected by fiber-optic cables. Here’s a bit more from the ad:
“… companies like…
* Virgin Group
* And even Coca-Cola
“…have poured nearly two billion into launching the specific technology I’m going to tell you about today.
“Even Fortune recently reported that following these companies’ lead is a way for main street investors to ‘win big’ right now.
“Because not only could this new breakthrough deliver faster, cheaper, reliable internet directly to your home…
“It’s also going to give you a perfectly solid connection in your car driving through the mountains… on your boat out at sea… at your cabin in the deep woods…”
Sounds good, right? I know my kids really, really, really want to have broadband internet in our car, taking away that one part of the day where they have nothing to do but read a book or listen to their parents (if they start putting wifi or broadband in all modern cars, we may have to go back to driving our 1966 Oldsmobile full time… even the AM radio doesn’t work, they’ll have no choice but to absorb our parental wisdom).
So what is it that Blanco is pitching here? A solution to that “last mile” or rural customer is a big part of it — he brings up several examples of folks who can’t get broadband access because they’re out in the country, or just don’t have the right fiber optic cables in their neighborhood. More from the ad:
“Customers now using internet from the heavens have called it a game changer – clocking in at 12 times faster, yet 10 times cheaper than what they were forced to use before.
“Here’s the best part…
“Until now, the precursor to this extraordinary technology has only been rolled out to 15 countries around the world.
“But soon, it could replace dial-up, cable, DSL and even fiber in every city and town in America.
“Making the lives of virtually every American more affordable and far less stressful.”
The bad news? Ray Blanco keeps mentioning this October 1 deadline — apparently that’s the date by which you have to “position yourself” to take your share of the $251 billion internet market. So how is it that we’re supposed to position ourselves? Let’s get a few more clues from the pitch:
“A stunning breakthrough in something called ‘L.E.O. transmission’ is about to snap up most – if not all – of that hugely profitable market and make technological history.
“And at the center of it all sits a tiny, privately-held company that holds the exclusive legal rights to use their technology to connect every human on the planet – with the virtual flip of the switch.
“Not only will this company change the whole world’s perception of what an internet provider is, it is also poised to make investors very, very rich.
“Once they launch their breakthrough L.E.O. transmission project, they are poised to tap into an additional $35 billion of profit every single year – just in the US alone.”
That “Halo-Fi” refers to a network of low earth orbit (that’s the L.E.O. bit) satellites which travel far closer to the earth than most satellites and therefore get rid of the latency problem that has been a serious limiter for the speed of satellite-based internet — Blanco refers to them as “micro-routers” that circle the earth about 750 miles over our heads…
“It Takes Just Three Halo-Fi “Micro-Routers” to Cover an Area the Size of India.
“And to blanket the entire earth in high-speed internet?
“As this company is about to prove, it could take as few as 648 micro-routers.
“Then, once the switch is flipped on, receiving internet in your home is simple.
“No spotty modems. No outdated copper. No fiber.
“You don’t even need to buy an antenna.
“You’d simply need to be near a school, public building or municipal building that has a receiver on its roof and your phones and computers will automatically log on.
“Now, if you prefer, you can buy your own receiver for a one-time payment of about $200.”
So what they’re talking about is a company called OneWeb, which used to be called WorldVu. It was founded by Greg Wyler, who has long been a scrappy internet provider entrepreneur (driven by both profit and social missions, apparently — one of his biggest projects was wiring Rwanda for broadband), and his company now features some huge backers on its Board of Directors, including Richard Branson, Suni Bharti Mittal, and Paul Jacobs of Qualcomm, who all participated in OneWeb’s $500 million Series A funding round…. and it also received a massive $1.2 billion investment from Masayoshi Son’s Softbank, and, with Softbank’s help, nearly merged with Intelsat (I) earlier this year before that merger was squashed by Intelsat’s debtholders.
But OneWeb is, as Ray Blanco notes, private. That means you can’t invest in it. So what’s the story with this investment tease? More from the ad:
“Launching this company’s entire constellation of micro-routers – including a network of receivers on Earth you can automatically log on to – is expected to cost just $3.5 billion.
“So not only are we talking about the most reliable internet the world has ever seen…
“We’re also talking about possibly the least expensive way EVER to launch it.
“Which, by my cost analysis, will then translate into a monthly charge of no more than $7 a month for users just like you.
“Which means we’re really talking about…
“A fundamental shift in the history of the internet itself.
“And my intelligence points to October 1st as the day this private Halo-Fi company begins the process of going public on the stock market.”
OK, so that’s part of it, there’s some plan to begin the process of going public, and for some reason Blanco’s intelligence points to yesterday, Sunday, as the day that process begins. But he’s not just talking about buying this stock if and when it goes public…
“But here’s the catch…if you want to claim those gains for yourself, you have to take action BEFORE October 1st.
“Because I’ve developed a ‘one-two’ profit punch” strategy to capitalize on this world-changing technology before AND after it makes its way onto the public markets.
“It’s a simple strategy…one that could make you a cool six-figures before the year is out.”
What else might be causing this “rush” for a company that already has a $1+ billion investment from Softbank for a project that in its entirety, according to Blanco, will only cost $3.5 billion? Apparently there’s a deadline:
“… in 2012, the CEO of this company successfully secured the global rights to operate his Halo-Fi technology exclusively within the ‘microsatellite band’ of space.
“Under the first-come, first-serve ITU rules that govern the deal, if this company can get their microsatellites operating any time before the end of 2019, they have the sole rights to operate inside this band.”
That’s not necessarily the full story, Wyler did get hold of the previously failed Teledesic’s spectrum rights, which were first granted well over a decade ago (Teledesic was a previous low-orbit internet satellite constellation company that failed, despite big backing from Bill Gate, Craig McCaw and the Saudis, and stopped work in 2002), so these projects didn’t begin just in 2012… though Greg Wyler did indeed file first with the ITU, and that is indeed a “first-come, first serve” license that requires OneWeb to get their satellites up by 2019 to claim that spectrum and license and force everyone else (if anyone else proceeds with actually building a constellation) to work around their spectrum or cooperate with them.
That “first place” position has helped Wyler get all this funding — it was after that license that they got their big Series A funding back in 2012, and since then other big partners have reportedly been sniffing around, including a possible deal with Google that didn’t materialize and, more recent, the big Softbank investment. It also almost led, reportedly, to a possible partnership with Elon Musk’s SpaceX — though SpaceX seems now to be more of a competitor than a collaborator, and One Web is planning to use Branson’s Virgin Galactic and use the New Glenn rocket from Jeff Bezos’ Blue Origin to launch its satellites (instead of SpaceX).
There are other not-very-well-known projects who have registered with the ITU beyond SpaceX, too, all of them essentially getting in line to stake their claim on spectrum and satellite slots in case OneWeb misses its deadline — most of those projects began their filings a little under two years ago, right after Google and SpaceX got a lot of press coverage for their satellite ambitions. Last year we even saw a teaser pitch for an Aussie company that was pitched as “critical” to SpaceX’s satellite internet plans, so this story is out there in the investing world. (That pitch was about space junk and the risk it poses to satellites, incidentally — and the stock has done pretty well, though the connection to SpaceX is obviously quite tenuous.)
But still, the fact remains, OneWeb is private. How does one invest in it? Assuming you want to?
Well, if you want to invest in it before the IPO, the only way to do that is by buying shares of one of OneWeb’s publicly-traded backers that participated in one of their venture funding rounds. That would mean Qualcomm (QCOM), Airbus (EADSY), Coca Cola (KO), Hughes Network Systems (Echostar), or Intelsat (I)… or, of course, Softbank (SFTBY) itself, though Softbank’s investment in OneWeb represents only about 1% of its market cap (Softbank may be a fine buy if you like Masayoshi Son’s decisions, but its prospects depend far more on major investments in Sprint, ARM Holdings, Alibaba, Didi Chuxing, NVIDIA and others).
Either that, or you could participate in the idea of OneWeb’s mission by buying one of the other possible partners for OneWeb now that the Intelsat deal has failed (it was scrapped in June, mostly because bondholders wouldn’t accept the massive writedown offered by Softbank, but most people seem to think that OneWeb would do better if it collaborated with an existing satellite company) — those other suitors would presumably be the other major commercial satellite fleet operators like Telesat (half owned by Loral Space (LORL)), Gilat (GILT), Iridium (IRDM), Viasat (VSAT), Orbcomm (ORBC) and Echostar (SATS).
If those are the choices you give me, I’d be most inclined to take Viasat (VSAT) or Echostar (SATS) seriously, though Qualcomm (QCOM) is certainly the one that has the most reasonable valuation and is clearly a fine buy as long as the Apple dispute doesn’t completely destroy their royalty revenue in the future (that’s not at all guaranteed, unfortunately, and I sold my QCOM a while back). VSAT is one of the largest holdings of Seth Klarmann’s Baupost, which is a pretty strong vote of confidence, and SATS has both an ownership stake in OneWeb and a compatible consumer-facing business that’s profitable and growing earnings, though it certainly ain’t cheap.
I have no insight into who Softbank might pursue in Masa’s plan to consolidate OneWeb with an existing operator, but those are decent companies that are worth a look and are small enough (VSAT and SATS, at least) to see a significant economic impact from this planned satellite constellation. Airbus seems most economically involved in OneWeb’s actual operations, since they’re OneWeb’s partner on their satellite-building factory in Florida, but Airbus is one of the largest space companies in the world in addition to being the second largest aircraft manufacturer, and OneWeb’s little project won’t make much of a dent on their income statement.
As to whether OneWeb itself will be worth an investment once it becomes available in an IPO, that depends, of course, on what the valuation is. (And it doesn’t necessarily have to happen — there’s abundant private capital out there for a tech company like OneWeb that’s run by a charismatic founder and has a gold-star board. The Intelsat merger would have effectively brought them public without an IPO, and that could happen with some other partner.)
There’s no rush on that front, though, not unless you’re hurrying to fill up the subscriber rolls for your newsletter — OneWeb (or WorldVu, if they keep using that name with the SEC) has not filed an S-1 or otherwise given any indication that they’re on the verge of an IPO.
Satellite internet is an appealing idea, though the notion that it can replace fiber optic connections or next-generation wireless with comparable speed and cost remains pretty untested — and satellite networks are, even in this age of billionaire-funded private space companies, awfully expensive to build, deploy and maintain. There’s a reason why so many satellite companies have had balance sheet problems (like Intelsat), and why the pursuit of private space flight requires billionaires to open their own wallets — space is hard and expensive.
Which doesn’t mean that OneWeb won’t work out as a great advancement for mankind, or even a great investment, but, if you’re researching this idea, I’d keep your expectations a little closer to the horizon. If you’ve looked into private satellite businesses, or OneWeb, or have any similar favorite ideas to share, please shout ’em out with a comment below.