Viasat/Inmarsat $7.3B Deal Seen Getting Regulatory Nods

Regulatory OKs could take nine to 18 months, with the companies to speak with regulators in the U.S., U.K. and elsewhere about how the deal should accelerate innovation at New Viasat and lead to more customer choice in a competitive marketplace, Viasat General Counsel Robert Blair said in a call with analysts. Asked if the FCC would be one, Viasat and the commission didn't comment.

Access Partnership Technical Development Director Mike Thompson told us Inmarsat's Ka-band network will fit well with Viasat's Ka-band geostationary orbit (GSO) operations, but New Viasat faces a very competitive landscape and isn't likely to raise anti-competition concerns. He said U.K. regulators might press the company about preserving Inmarsat's L-band safety communications service for maritime and aeronautics, as the government has a strong interest in that service. He said some U.K. pressure about maintaining Inmarsat's headquarters presence in London also is possible.

Viasat said it would "preserve and grow" the London headquarters presence.

Inmarsat was seen as a likely acquisition target, Northern Sky Research President Christopher Baugh told us. He said the satellite operator business is "in a fundamental state of change," with looming big competition from deep-pocketed low earth orbit (LEO) operations like SpaceX. GSO operators, meanwhile, haven't been growing and need more efficiency and vertical integration, he said.

There has been some satellite communications consolidation, such as Intelsat's purchase of Gogo (see 2012010026) and Viasat's RigNet purchase (see 2105190004), but Viasat/Inmarsat is a combination of operators that could trigger other mega deals in response, such as long-rumored SES/Eutelsat or a tech company buying SES, Baugh said.

Access Partnership's Thompson said Viasat and Inmarsat dominate in the Ka band, and satellite industry consolidation is more like among C- and Ku-band operators where a shrinking customer base won't sustain operations, leaving smaller players as takeover targets. He said Viasat and Inmarsat likely see the LEO boom coming and are trying to consolidate their market before facing that competition.

New Viasat would have 19 satellites, plus eight GSOs more to be launched over the next three years, while Inmarsat has two polar orbit satellites under construction, Viasat said. It said the forthcoming ViaSat-3 satellites would be interoperable with Inmarsat's existing GX network. It said the deal also could represent bigger IoT opportunities and that it expects revenue growth in the mid-teens driven by mobility and government.

With combined revenue of $4.1 billion, New Viasat would be the world's largest GSO operator. The deal would give New Viasat more scale to invest in R&D and network infrastructure, said Viasat CEO Rick Baldridge. He said the two companies have complementary narrowband, broadband space and terrestrial assets. He said the addition of Inmarsat brings global coverage instead of regional offerings. Baldridge said the deal would be cash, stock and assumption of Inmarsat debt. With increased demand but also a fragmented marketplace attracting new entrants, "scale and scope is [increasingly] important in satellite," said Inmarsat CEO Rajeev Suri. Viasat Chairman Mark Dankberg said Inmarsat's L-band spectrum potentially could be used in air-to-ground 5G connectivity that could supplement satellite broadband.

Asked about how the deal would affect the companies' own LEO plans going forward, Dankberg said there's "a place for LEO" as an augmentation for geostationary service, and it could involve New Viasat assets or partners.