Why SKY and Space Global Ltd shares rocketed 31% higher today

The SKY and Space Global Ltd (ASX:SAS) share price was a huge mover on Thursday morning following a major new agreement. Here's what you need to know…

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In morning trade the SKY and Space Global Ltd (ASX: SAS) share price has been one of the biggest movers on the market with a huge jump higher.

At one stage its shares were up 31% to 21 cents. They have since given back some of the early gains, but still sit 25% higher at 20 cents.

What happened?

This morning the global communication infrastructure company advised that it has signed a five-year binding network contract with mobile payments start-up BeepTool worth approximately US$30 million over the term.

BeepTool will leverage Sky and Space Global's network as part of their commitment to building innovative messaging and payment solutions to help connect the unconnected throughout key African markets.

Management believes that the agreement commercially validates its nanosatellite technological capacity and delivers a critical financial contract for the next phase of its project.

Furthermore, it believes the combination of the technological capabilities of BeepTool and its network has huge potential for improving commerce in rural areas by using secure peer-to-peer banking to enable low-cost mobile payments in regions with limited access to traditional banking services.

Should you invest?

I can't say I'm surprised by the share price rise today. I believe this not only validates the technology, but also alleviates any concerns over further capital raisings to fund the next stage of its project.

While I'm still not ready to make an investment just yet and will stick to traditional telco Telstra Corporation Ltd (ASX: TLS), it certainly is coming close to being investable.

After all, deals like this add a lot of credibility to management's forecasts. It has previously estimated that the full Equatorial constellation of nanosatellites has the potential to generate between US$600 million and US$1 billion in annual revenues.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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