Desjardins report Apple-Starlink headline causes unwarranted MDA sell-off—no panic in the
cosmos...or with our ATP thesis
Yesterday evening, Bloomberg reported that Apple has been “secretly working” with SpaceX and T-
Mobile US to add support for the Starlink network as part of its latest iPhone software (part of a beta
test). MDA and Globalstar (GSAT, NYSE American, not rated) shares were down >20% this morning as
investors were clearly spooked by the headline on fears that Apple had completely pivoted toward
Starlink. However, this should not come as a complete surprise as ever since Apple began teaming
up with Globalstar in 2022, there has been speculation over whether Apple might support competing
networks (not a new conversation).
In our view, this news does not signal in any way that Apple will opt out of its existing agreement with
Globalstar as only a couple of months ago it teamed up with Globalstar on plans for a new constellation,
which included a capex prepayment of up to US$1.1b as well as a US$400m 20% stake in Globalstar’s
spectrum licensee subsidiary (this would be a drastic pivot). While anything is possible (and a billion
dollars isn’t exactly material for Apple), we continue to believe Apple is in this for the long haul and is
fully committed to having its own constellation with Globalstar (which has agreed to allocate 85% of
its current/future network capacity to Apple) for some type of potential value-add service in the future
(there have been rumours of satellite connections to Apple Watches, AirTags, Macs, etc).
Globalstar satellites have their own operational D2D space-based spectrum vs Starlink, which is
testing/developing a hybrid terrestrial-based spectrum network with T-Mobile (FCC granted Starlink
conditional approval for its satellites to supplement T-Mobile’s cellular network only back in
November). We view these as two different offerings which are interoperable and give the iPhone end
user optionality (supplementing and not replacing). A delicate balance is likely needed here as T-Mobile
and other MNOs are some of Apple’s largest customers.
Ultimately, this article has not changed our thesis (see our note) that the new Apple-Globalstar
constellation is behind MDA’s mysterious ATP contract. Recall that while the full ATP contract
announcement has been delayed (had been expected before the end of 2024), MDA is not sitting on
its hands as it has already begun early engineering/procurement work (given the long lead times), the
initial contract was upsized to C$300m (from C$180m initially), and, when speaking with the company,
work continues to progress on the original 17-satellite order from Globalstar. Ultimately, we view the
MDA share price drop as an overreaction and the weakness as a buying opportunity.