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Buy New Providence Acquisition Corp., Not Nokia

AST & Sciences, which is coming public via the New Providence SPAC, is a much more attractive play on the future of telecommunications.

The Reddit craze has come to a lull. It may be too early to call an end to the trend, but we saw some interesting names gain traction during that period. Many of those happened without reason. A few names even stumped me. I understood the idea of pushing a low float or high short interest stock, but Nokia  (NOK) - Get Nokia Corporation Sponsored American Depositary Shares Report was a bit of a head-scratcher. 

The company is worth $23.7 billion, it has a huge available trading float and the short interest is barely a blip, yet somehow shares more than doubled in a matter of just days. I can only reason traders drove up the price of Nokia because it was a "cheap" stock in nominal terms. In short: its price was under $5.

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Even if traders were playing Nokia based on the concept of smartphones or 5G, the company recently admitted 2021 was going to be challenging. That doesn't sound like a name staring at the huge growth in front of it. As alternative upside 5G plays, traders could easily play names like Gogo  (GOGO) - Get Gogo Inc. Report, Ondas ONDS, or Inseego  (INSG) - Get Inseego Corp. Report

Or an investor could look to the next evolution in smartphone network growth via AST & Sciences.

AST & Science is coming public via SPAC New Providence Acquisition Corp NPA, a bit of an under-the-radar name. While we hear about advancements in smartphone technology and network speeds, what AST & Sciences is doing is literally out of this world. The company is building Space Mobile, the first of its kind space-based cellular broadband network-accessible directly by standard mobile phones. 

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The company's move to the public market includes investments from Vodafone  (VOD) - Get Vodafone Group Plc Report, Rakuten  (RKUNY) , American Tower  (AMT) - Get American Tower Corporation (REIT) Report and Samsung  (SSNLF) . With a projected $423 million of cash against no debt on the balance sheet, AST SpaceMobile will be positioned to rapidly grow out the first phase of its network. While the company anticipates the total network build-out will cost around $1.4 billion through 2024,  doing it in phases will reduce risk.

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That being said, management expects revenue of $1.07 billion in 2024. And that assumes a subscriber penetration rate of less than 1%. Combine that penetration rate with the revenue and you get a feel for how enormous of a market this is for SpaceMobile. We're talking five billion phones across the world. Thanks to existing partnerships, upon completion, AST SpaceMobile's network will be offered to 1.3 billion customers.

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It may seem odd to layer a new service atop of an existing service, but SpaceMobile fills coverage gaps, especially in rural and underserved areas. Additionally, it can replace reliance on large, unsightly towers while offering high data rates with low latency -- all at an affordable price. So even if you are out of range of cell towers, you'll still have coverage no matter what kind of phone you're using.

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The only potential competition comes from various LEO (low-earth-orbit) systems that will operate thousands of satellites. However, the cost to build each of these networks will run in the billions. Acquisition costs currently sit at $1,000 per subscriber, and while that will decline over time, it will remain well above AST SpaceMobile's $0 cost since AST is relying on a 50/50 revenue share with its partners. Additionally, LEO systems focus on a customer base of governments, maritime and aviation organizations, along with some enterprise and residential users, while AST can cover the entire cellular wireless sector.

With over 750 patents, first-mover advantage and exclusive agreements with many of the largest global wireless companies, AST has positioned itself with a big lead over any potential rivals. That makes it a much more attractive play on the future of telecommunications than Nokia. 

Tim Collins is a regular contributor to Real Money, TheStreet’s premium site and provides options trade ideas each day on Real Money Pro, our sister site for active traders. Click here to learn more and get great columns, commentary and trade ideas from Jim Cramer, Helene Meisler, Mark Sebastian, Paul Price, Doug Kass and others.

At the time of publication, Tim had long positions in NPA and GOGO.