An SES/Intelsat Deal Seen Raising Anti-Competitive Challenges
Intelsat and SES are talking about combining, as a key area of business for both -- maritime connectivity -- will soon face new low earth orbit (LEO) competitors. Competition and antitrust issues could be a big hurdle for any deal to clear. SES confirmed this week it's in talks with Intelsat about a possible deal.
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A combined SES/Intelsat would instantly have a maritime connectivity customer base of about 13,000 vessels, making it a big rival of market leader Inmarsat, which has around 14,000, said maritime research consultant Joshua Flood of Valour Consultancy. SES has a sizable presence in cruise ship connectivity, which is far more lucrative than cargo ship connectivity, he said. It also has shipping giant Maersk as a customer, he said.
LEO operators like SpaceX's Starlink and OneWeb "are really going to shake up the tree" in maritime connectivity, Flood said. He said Intelsat/SES discussions are likely about trying to consolidate their position and compete against LEO disruption. The lucrative passenger ship business is particularly interested in faster bandwidth and more data capacity, he said.
A deal would let the combined companies reduce capital spending and better use satellites not fully utilized now, said Armand Musey, Summit Ridge Group president. There also are economies of scale, and the two combined would have better scale and financial ability to become more vertically integrated, he said. But a deal could face big antitrust concerns, he said.
SES and Intelsat are both active in video delivery -- an application that doesn't have LEO competition, Musey said. Viasat/Inmarsat faced regulatory concerns on the basis of reduced competition in in-flight connectivity, and SES/Intelsat would increase that consolidation in the in-flight connectivity market, he said. The European Commission said in February it was investigating possible anti-competitive effects of Viasat/Inmarsat in the in-flight connectivity space (see 2302130038). Musey said the maritime marketplace might also raise anti-competitive concerns.
How a combined Intelsat/SES would compete with Starlink isn't clear, given SpaceX is more efficient on a per-bit basis, Musey said. SES' O3b LEO system and its mPower medium earth orbit system will give it more capacity, but the fact its user antenna sizes are particularly large has somewhat limited the market for O3b, he said.
In a call with analysts, Telesat CEO Dan Goldberg said news of the talks wasn’t surprising, nor is the M&A activity going on in satellite. He said such a deal would be part of the latest satellite industry cycle of consolidation, happening alongside the pending Viasat/Inmarsat transaction and Eutelsat buying OneWeb. Intelsat/SES would be "a good thing for the industry" and help rationalize supply, he said.