The planned $7.3 billion (€6.3bn) acquisition by Viasat of Inmarsat confirms Viasat’s position as the satellite industry’s largest player in terms of revenues. But the deal could also herald a further suite of consolidations.
In the words of analyst Sami Kassab, from investment bank Exane/BNPP, this transaction will help diversify Viasat’s geographic and vertical exposure, bring scale and cost savings to reinvest in building a next-generation multi-orbit, multi-band infrastructure.
Viasat is paying around a 20 per cent premium on the $6 billion private equity take-out bid of Inmarsat which happened in 2019. Kassab suggests that Viasat is projecting an $80 million of synergy OPEX savings and a further $110 million of annual Capex savings.
Viasat derives 64 per cent of its EBITDA from providing Satellites Services into US consumer broadband markets as well as Inflight Connectivity and Oil & Gas and over 80 per cent of its revenues come from North America. Faced with increased competitive pressure from Space X, SES or Telesat, Viasat is joining forces with Inmarsat to build scale, extract cost synergies and reinvest in a multi-orbit, multi-band satellite system with established distribution channels. Management has also argued that Inmarsat’s air to ground spectrum rights are likely to prove useful in providing bandwidth density over mobility hubs such as airport or ports.
“The satellite industry has entered the age of mega-constellation,” adds Kassab. “The best chance incumbent operators have to compete against Space X or Amazon Kuiper is to build scale and invest in a multi-orbit, multi-band next generation infrastructure. Eutelsat/OneWeb and SES are the most advanced in terms of deploying such a system. We do not believe the Viasat/Inmarsat merger fundamentally changes the competitive dynamics for Eutelsat or SES. Neither Viasat nor Inmarsat operates in Video (60 percent of Eutelsat and SES EBITDA). Inmarsat has no consumer broadband business and its LEO project looks several years beyond SES mPower or OneWeb. We rate SES ‘Outperform’ as we believe in the commercial success of mPower as a driver of a return to positive group revenue growth in FY23. We remain ‘Neutral’ on Eutelsat as the current share price already assumes a revised offer on the company.”