Intelsat planned merger drives other M&A
March 6, 2017
Last week Japanese telco giant SoftBank and Intelsat and OneWeb announced a merger scheme that would boost Intelsat’s existing geostationary satellite fleet by adding around 650 low Earth orbiting (LEO) satellites. The first of these additional satellites could be in use by 2019.
It also means that Intelsat+OneWeb would be the world’s second major geostationary satellite player to embrace a lower orbiting fleet. The other is SES which already owns O3b, an existing 8-satellite fleet that will shortly expand to 16 satellites, and perhaps more. O3b operates at a Mid-Earth (MEO) orbiting height, higher than OneWeb.
But if Intelsat and SES understand the commercial logic of adding these new super-constellations, what about the other major satellite players.
Some are moving in that direction. For example, Telesat of Canada (the world’s fourth-largest operator) is building a pair of LEO test satellites – and has asked the FCC permission to build up to 117 satellites.
Arabsat of Saudi Arabia is another major player contemplating adding to its fleet with a lower orbiting fleet. Khalid Balkheyour, president/CEO at Arabsat, says that the company is also looking at other orbits besides geostationary. “We are looking at LEO and MEO, and very seriously. We cannot afford to miss the developments. How much we can invest and how we might invest is part of the strategic study now being worked on. We have not finalised our strategy. In general, we think it is better to partner for many obvious reasons, not least to gain knowledge form one another, and to share the market and risk. The minute you enter the LEO or MEO market you are then global. But this isn’t easy. We need the infrastructure on the ground, as well as the landing rights and other regulatory obligations. At the beginning it would be wise to partner, but we are not yet in a position to make a decision. We have to make a decision soon, and we expect to present to our Board this year.”
As yet there’s no news from Eutelsat as to what it plans it might have. Eutelsat, however, has some problems, not least as self-imposed limit on new spending and investments. But never say never. Intelsat found an innovative way around its massive debts via Japan’s Softbank, and Eutelsat is in a significantly better place as far as borrowings are concerned. But without a similar expansion strategy Eutelsat might find itself side-lined in the race to cover the globe with high-capacity broadband services.