August 16, 2021 – On today’s podcast, we welcome special guest Eric Stonestrom, CEO of Airspan Networks. Airspan is a newly-public company that provides software and hardware for 5G network solutions.

On the podcast, Eric discusses:

  • What is so great about 5G technology for society
  • Airspan’s product suite and how they expect to take market share from legacy network providers
  • Who are their customers and competitors in the marketplace
  • The future of network technology
  • And more

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Welcome investors to the Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies. Your hosts Julian Klymochko and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.Accelerateshares.Com.

Julian Klymochko: Welcome to the podcast Eric, we are looking forward to doing a deep dive into 5g and all the technologies that Airspan is bringing to the market, really to make our lives much, much more easier with respect to connectivity and communication. But prior to getting into that, you’ve been a long-term tech guy, cut your teeth at Bell Labs in the eighties and early nineties prior to joining Airspan. In 1998, rare CEO, where you’ve been in that seat for over two decades. I was wondering, 5g is still a relatively new technology, but Airspan has been around for more than 20 years. What was the company doing back then and how has it evolved since? 

Eric Stonestrom: Well, we’ve actually been on a pretty consistent trajectory. We tend to bring real innovation to connecting people to telecom networks, and that’s obviously had different instantiations along the way, but we started the company on fixed wireless access which is actually connecting to fixed locations, using the best of breed technology that’s out there. And, we started the company in a time when telephone companies had to provide connectivity to anyone who wanted a connection, typically at a fixed price and the economics as they are today of telecom really relate around density. So, when you have a dense place in a crowded place, it’s easy to get good economics on your infrastructure or easier. Now it’s getting harder of course, with 5g, hence our opportunity. But in those days, it was all about getting the highest speed you could get at the lowest possible cost using wireless as an alternative to fiber and copper.

So, we’ve been through a very consistent set of technological developments that has brought us to this juncture, where we’re able to bring a lot of products to this Super cycle of spending that’s, embodied in 5g. This is in my career, the most exciting Capex cycle that I’ve ever encountered. We have not only existing addressable customers, you know, the telephone companies around the world that offer a handset service, you know, a very big cycle of spending there. You might’ve seen, there was an announcement over the weekend of Verizon committing $8 billion of capital in one aspect of their network to Ericsson, we actually make product that plays in adjacent sector. So that’s good news for us, but we also have now a new entrance in the 5g build out, which means new addressable customers for us.

And that’s a couple of different places. One is the fixed wireless. So come full circle to where we started the company some years ago. The demand now for connectivity using wireless to fix locations is really on fire. A recent report from Jeffrey’s, analyst George Notter estimates there are 23 million unserved locations in the U.S. alone. And that problem is global and COVID and locked down, push that piece of the curve even faster because as we all started to work from different locations.  We didn’t want to have to walk to the top of the hill to call our boss. We need high speed to be able to do nice video from wherever we happen to be. So that’s a segment that was quiet for the last decade and a half has now become very active again, and we have deep skill sets there.

We have new greenfield operators entering in 5g. So those greenfield are our customers like Rakuten that we have in Japan, that was our biggest customer last year. And is a company that’s basically in the market, was in the market historically selling cell phone service as a reseller of one of the three bigger carriers and now building their own with the network economics they can get with 5g, we’re very active there. Similarly in the U.S. there are a couple of cable companies doing the same thing, weaning off of MVNO, a resell relationships with the bigger MNO carriers under their own brand name to build their own networks and get network economic. So that’s a very big sub-sector of addressable market for us. 

Then we have the fixed wireless segment that I mentioned and then we have the private, what we call private networks. And that’s really where 5g is touching many more places in the I.T. span cycle. Cathy Wood at ARK, estimates it’s a $1.5 trillion a year spend in enterprise technology. And now some percentage of that’s going to 5g infrastructure. In the past it was really a divorced kind of cycle and spending area away from what telecom operators spent. So that gives us a really exciting time now and what I call this 5g tsunami, where we have the right products at the right time. So that’s a little bit about how we got from where we were to where we are now. 

Julian Klymochko: And speaking of this 5g tsunami, there’s been a lot of hype around 5g. You constantly hear about it, Airspan tech is a key enabler of 5g. Now to the non-engineers out there. What’s so great about 5g and what exactly is the opportunity for the company? 

Eric Stonestrom: Yeah, so 5g, first is great because it means a lot faster speed. So, there’s new ways of sending the information over the air. And we have a bunch of intellectual property around that. But think of it like a highway that you can run the cars faster in each lane but the second thing is 5g allows more lanes because new spectrum has come to market and that’s both dedicated spectrums. A spectrum is the highways, if you will, the way carriers connected to people and enterprises. And so that highway is not only the cars have gotten faster. The width of the highway has gotten wider. They’re more owners in that highway, as I mentioned before, because now you not only have traditional telephone companies like Verizon or T-Mobile, but you have cable companies, so you have greenfield rollouts. And then we also have a shared highways for the first time. And so that’s additional spectrum. And then finally the equipment itself is much more software centric. So, in 4g and previous generations of wireless, the technology typically was built putting big pieces of equipment up on towers. They’re about 120,000 towers in the U.S. To do 5g, we estimate we need over a million cells, and that’s because as these highways get faster and new frequency comes, the characteristics of the way you need to roll the equipment out changes. And it changes in a way that’s very beneficial for Airspan, a lot more cells and a lot more software.

Michael Kesslering: And so, you mentioned, I guess the different product categories that you have in different revenue streams, and obviously a ton of growth within this sector. How do you believe you’ll be taking market share as well as growing with the sector? Is it a focus on just a truly differentiated product offering, or are you able to better compete against your main competitors on price?

Eric Stonestrom: Great question. And yes, first it’s a truly differentiated product offering. We’ve put over a million units of this type of equipment up so far, and in previous to 5g instantiations like 4g. We have products that have been optimized around the way things need to be built. They want to cling to the old model of putting big, expensive equipment up on towers. So, we have advantage there. We have a portfolio that’s best to breed. We’ve got a sluggish competitors, and then we also have some geopolitical tailwinds. Huawei is a big name, probably most of your listeners know from China, about 28% of the world’s market. And they’ve been taken out now of a lot of developing markets, Europe, the U.S., Australia, Japan. So, there’s scarcity of supply. So, we can step in there with innovation and better tools and better technology at a time when the market is demanding more alternatives.

And then we have, in addition, this fixed wireless market, that’s growing there, we are taking share from competitors. We made an acquisition in late 2018. That’s given us a very strong portfolio to compete against the likes of Ubiquiti and Cambium. Those are two names that focused on that fixed wireless side. In the previous space, I was discussing the big 5g equipment roll-outs. So, we compete against Nokia and Ericsson. Here, they’re focused the way IBM and other companies where they made mainframes in the eighties. They have a lot to lose through these new network models. And so, they’re moving to try to preserve their old approach. But the good thing is that market can’t use that old approach the way they used to use it in 5g, because the highways there’s so many more lanes in the highway and the cars are moving so much faster. So, a lot more processing power has to be put out close to the edge of the network, and that’s what we specialize in.

Julian Klymochko: Now, speaking of the revenue opportunity and total addressable market, who are some of your main customers and how big is this opportunity set you’re looking at?

Eric Stonestrom: Yeah, so we are anticipating a healthy growth this year. We have a target of 47% growth. This year we have a four-year target of 35% annual growth. We’re pretty confident in that because we have several types of customers that are all growing nicely. We have the bigger carrier projects. We we’ve recently secured a couple of major greenfield builds. Just to give you an example of what one of those looks like that we’re already working in, you know, the first year was $11 million of revenue. The second was $62 million of revenue, we expect the third year is going to be 80 plus. So that’s a single project with several different products inside of it, but a single customer. So that’s the size that a customer like that can be. And we have several we’ve signed in recent months. That’s one piece of growth. 

The second piece of growth is the fixed wireless segment, which is a combination of us taking share, and a lot of additional focus by both the private sector and government to build out. There’s over $14 billion of government stimulus, just in the U.S. coming into economic help for fixed wireless. And we’re aiming very hard at that segment. We bought this business in late 2018. We’ve doubled it since we bought it. We expect it to hopefully keep revenue moving at that kind of a growth rate albeit from a small base up through the foreseeable future as that $14 billion stimulus flows into the market. And then the third area of growth is what I called the private network side. And that’s where we’re selling through enterprise partners. They’re bringing to their enterprise customers now telecom equipment for first time. And we are the de facto choice with some of those partnerships. So, when they go into pitch an industrial group on 5g, Airspan is a part of it, so that’s pure growth for us because that type of segment wasn’t accessible pre 5g,

Michael Kesslering: Just to dig a little bit further on the financial side, you mentioned very attractive growth rates that your business is going to be seeing over the next couple of years. Can you talk a little bit about the operating leverage that’s embedded into your business model?

Eric Stonestrom: Yeah, and that’s something we’ve obviously been very focused on here as we go through the de-SPAC process. We got a very attractive proposition for investors. Our top line growth flows nicely through to the bottom line. We don’t need to add a lot of costs in the company. We have an outsource manufacturing model, which means that we outsource the manufacturing to a best of breed partner Foxconn. So, we can scale topline and then scale EBITDA directly through on a highly leveraged basis. We anticipate gross margins continuing to improve. We improve them from 32% in 2018 to 49% in 2020. Sales in the first part of this year, we’re up over 60%, gross margins we’re healthy. And so that means that, you know, the sales that we’re getting are worth more and that’s because of the mix. We have more software in the mix. We have more value-added leverage in our pricing. So, that gives us really good leverage on a flow-through to EBITDA from top line growth.

Julian Klymochko: A thread that I did want to expand on that you mentioned, the de-SPAC process. Airspan recently announcing a going public transaction, combining with SPAC New Beginning Acquisition, $822 million enterprise value. And now, before we started recording the show, we were talking about, you know, not a SPAC because really Airspan differentiates itself because it’s been around a long time, a very established business, contrary to many of the brand-new business models, more speculative in nature that we’re seeing go public via SPAC, you know, forecasting revenue, five years out, you guys have had revenue for a long time, but that being said been private for more than two decades. Why go public now? What’s going to change?

Eric Stonestrom: Yeah, so we are very excited about this process, great partnership with NBA. Just a little background of why we decided to work with NBA. The size of the SPAC was right. We have a set of shareholders who don’t want to sell. And so, what we weren’t interested in was a lot of dilution. So, we found a SPAC that was right sized for us. And the team at MBAs has been phenomenal to work with. We did want to get a public currency because as we go into a very rapid growth period, we wanted the shortest path to put, you know, 120 million plus on the balance sheet to add sales and marketing resource to scale and take advantage of the leverage I just described. And this is a straightforward path to do that. We’ve gotten good analyst coverage, even pre-de-SPAC

And the reason is exactly, as you said, we have product and revenue today and big customers today, and a strategy and a story that analysts can dig into and get to know. And that’s something very different than the SPAC that are talking about some kind of revenue out three or four years in the future, and wait to see until then. So, we’re very excited about the SPAC. We’re very excited about the phase of de-SPAC that we’re in right now. And we hope to see this come to fruition very, very soon.

Julian Klymochko: What really stuck out to me with respect to this transaction that you guys announced, some investors, including SoftBank and Dish participating in the concurrent pipe financing in addition Foxconn will also be a shareholder. It’s a very unique dynamic, such that you have these large conglomerates customers as shareholders as well, which we don’t see too often was that part of the strategic plan?

Eric Stonestrom: It was indeed. We have building this set of investors for some time. Now we’ve been able to put a series of real innovators into our cap table obviously [Inaudible 00:16:27] and SoftBank. And we’ve done hundreds of millions of dollars of business with the SoftBank Group. Similarly, Mukesh Ambani in India, Reliance Geo, which has become one of the largest telephone companies in the world from a cold start a few years ago, but also industry partners like Qualcomm that you mentioned, like Foxconn, which I mentioned earlier, who’s a producer for us and also a shareholder, that’s allowed us to bat way above our weight. And then we have some great financial investors as well. So, we really have a great set of investors today. It’s a very top-drawer collection of strategics. And, you know, the nice thing is they validate our products and they validate our vision because as suppliers, they don’t want to work with people that aren’t top notch and as customers, they don’t want to buy from groups that aren’t enabling to really differentiate. So, we’re very, very proud of that cap table. 

Julian Klymochko: Yeah, that certainly validates the story in terms of having customers and suppliers on the cap table. One thing that I don’t mind you expanding on because it is a differentiated strategy. Granted, I’m not the expert here, but I would like to hear more about why your strategy is to focus on fixed wireless and where the opportunity set for that a specifically for the company?

Eric Stonestrom: Yeah, so fixed is not the only part of the strategy, but I see two conversion themes over the next few years. And I’ve really been deep into this for the last five years. First this convergence of cable and telco, and we’re proving that out now, as we help build out a cable operator to provide cellular service and high-speed broadband service using that infrastructure of physical assets that are real value to the cable world and leveraging their very strong customer base in broadband connectivity. And then the other one is the fixed mobile convergence. So, as you said, the fix side of the equation was something that was exciting 15 years ago. It became rather quiet as telephone companies started to sell data services, office, cell phones but those services hit the limit of speed about three years ago and the limited economics. And so, we made an acquisition in late 2018, just to focus exclusively on bringing a best of breed fixed product into the marketplace. And we’re seeing that, and it’s growing very, very nicely. So fixed and mobile converge cable and traditional carrier and private network converge. And those convergence stories are really what give us so much excitement about the future.

Julian Klymochko: Right, and with respect to the future, this is a technology that seems to be rapidly changing and leaps and bounds. So, putting on your hat, thinking five to ten years out, what do you view as the future of network technology and what do you hope to see the company become and call it, you know, a decade’s time?

Eric Stonestrom: Yeah, so we’re going to have a lot of, a lot of processing at the access edge. One thing that’s clear is so much more network processing is required to cover the amount of speed that is being moved through the airwaves. Don’t forget spectrum is a limited resource. So, the number of highways that can be built is finite. So, we see more and more processing at the edge of the network. Very much the way the mainframe industry migrated to the desktop. Software dis-aggregated with names like Microsoft hardware evolve from mainframe only to desktop and cloud. And that’s obviously what we see happening to the telecom industry now. And we’ll be very, very active in that growth cycle. I think it’s a tremendous transformation from the old way of building to the new way. And we’ll be very much at the forefront of that.

Julian Klymochko: So, if investors are interested in hearing more about the Airspan story, where can they research and find out more in addition, anything that we didn’t touch on that you think is important for the story and the message for investors to understand?

Eric Stonestrom: Yeah, and I do urge people to look at our website to look at the NBA affiliate, the SPAC partner and various financial statements and other statement that have come out from them, a series of analyst reports are out, as I mentioned, there’s quite a bit of press coverage now on this supplier diversity, which is really the way Huawei is being phased out in the race to 5g. I think we covered a lot, obviously we are very deep in the technology. We didn’t spend that much time on it today, but the software defined radio experience that we have is unrivaled in the industry. The secular industry tailwinds around this 5g build-out, as I said before, driving the largest Capex cycle in decades. And then on top of just the raw technology growth, you add the significant government accelerators with the political and geopolitical situation. We are a U.S. company, so, you know, we are a U.S. fully integrated radio access network company. We are the only one that’s out there of any scale. And that means, you know, the U.S. can turn into an export economy again and telecom equipment. It’s been a net importer for a couple of decades. Really gives us excitement, that’s not all of the story, but that’s some of the highlights. So, we appreciate people’s interest and encourage you to dig in

Julian Klymochko: Eric, that’s a really good point. I just wanted to touch on that last one, that you mentioned the whole geopolitical issue with China  really getting pushed out of the market. Did that create a really good opportunity for Airspan?

Eric Stonestrom: Oh, very much. So, in fact, you know, four years ago we were the innovators for the more intelligent network builders in the world, like SoftBank and Geo, but we didn’t really have as much access to the main telephone companies because they bought from Huawei, Ericsson or Nokia, occasionally Samsung. Now that Nokia and Erickson have fallen behind and Huawei have been removed from the supply chain. We are best of show, people need to figure out how to use these innovative tools. So, it really has made a big difference.

Julian Klymochko: Yeah, that’s it. I think that’s a key aspect of the story here for investors. And to the extent they’re interested, New Beginning, the SPAC is currently trading under the symbol NBA. And as I understand once the deal closes your symbol will be, MIMO. So, Eric, I’d like to thank you for coming on The Absolute Return Podcast today, a ton of details and insights, in to be opportunity behind 5g, fixed wireless and all the happenings at Airspan. So, wish you the best of luck throughout this de-SPAC process and looking forward to seeing how things develop.

Eric Stonestrom: Thank you. Have a good day. 

Julian Klymochko: All right. Thanks. Bye everybody.

Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed.


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