Will the Inmarsat-Viasat deal trigger more consolidation?

Will the Inmarsat-Viasat deal trigger more consolidation?

The $7.3 billion takeover of Inmarsat, a leading provider of global mobile satellite communications services, by global communications company Viasat, whose offering includes high-speed satellite broadband services, is undoubtedly big news, but what are its implications for the satellite communications sector as a whole?

The newly merged companies have no doubt that this is a good move. Inmarsat says: “The combination will create a leading global communications innovator with enhanced scale and scope to affordably, securely and reliably connect the world."

It continues: "The complementary assets and resources of the new organization will enable the availability of advanced new services in mobile and fixed segments, driving greater customer choice in broadband communications and narrowband services (including the Internet of Things)."

Inmarsat’s strength in Ka-band and L-band and its global presence are no doubt attractive to Viasat, which plans to preserve and grow Inmarsat’s London headquarters, as well as its footprint in Australia and Canada and across Europe, the Middle East, Africa and Asia Pacific.

The new entity will have a particular interest in delivering what it calls "superior services in fast-growing commercial and government sectors" and is promising lower latency at lower cost than either company could provide alone.

This is an important point. At the very least the promise of improved service from this partnership could encourage further merger activity in what is, at the moment, a highly fragmented satellite industry.

A bonus for investors is that satellite construction and launch costs are going down – and opportunities to deliver more mobility and data services from cheaper satellites, many at low earth orbits (LEO), are growing.

However, as the UK’s Financial Times newspaper points out, operators of very big satellites at higher geostationary orbits – where only a small number of satellites are required to cover large areas but there are greater latency issues – are facing a decline in the legacy broadcast business and a huge capacity glut.

Even the LEO business, which requires many more satellites, but offers less latency and is more relevant to real-time communications, is getting crowded.

In fact the FT estimates that, all told, there are about 55 satellite companies. Consolidation could be one way to cut costs and improve efficiencies. Thus, the arrival of a giant player in the form of a combined Viasat and Inmarsat could encourage other players to set aside their differences and join together simply to compete effectively.

But will they? And if so, who will join up with whom? Whatever the answers to those questions, the coming year promises to be a very interesting one for the satcoms business.

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