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Inmarsat and Viasat fight UK regulator over $7.3bn merger

Mark Dankberg - Viasat.png

Satellite companies Inmarsat and Viasat, which are hoping to merge next year, have criticised the UK’s competition regulator for saying that the union will put up prices for airline passengers.

The Competition and Markets Authority (CMA) says a merger gives “rise to a realistic prospect of a substantial lessening of competition”, and it believes they “are currently the strongest [in-flight connectivity] providers available to airlines”. It talks of “significant competition concerns” if they merge.

California-based Viasat and UK-based Inmarsat announced their plans to merge in November 2021, putting the deal at US$7.3 billion.

Last week the UK government approved the merger under the National Security and Investments Act. The CMA, however, begs to differ.

In a statement from California, Viasat retorted that the “planned transaction will benefit airline, passenger, and enterprise users of in-flight connectivity (IFC) in aviation businesses”.

Mark Dankberg (pictured), CEO and executive chairman of Viasat, noted that IFC will represent less than 10% of the revenues of the combined company, but added: “This is still a nascent, dynamic, and rapidly evolving business, with existing providers and extremely well-financed new entrants bringing new technologies and new business models to increase adoption among airlines, passengers, and aircraft types.”

The CMA report noted entrants into the market, including SpaceX’s Starlink and OneWeb, the UK-based company that is expected to merge with France’s Eutelsat.

Indeed, the CMA report accepts that certain operators, “namely SpaceX and OneWeb, are taking steps towards supplying IFC services”, and agrees “they have operational constellations in orbit, are supplying connectivity to fixed broadband customers, and are marketing their services to airlines”, and “SpaceX has won an IFC contract with Hawaiian Airlines”.

But, it complains: “However, none currently has an IFC service that is proven to work.”

Dankberg, saying the CMA report was “not unexpected”, insisted: “We intend to work closely with the CMA to show that our transaction will benefit customers by improving efficiencies, lowering costs, and increasing IFC availability around the world.” He said he expects “to reach a satisfactory conclusion” in the next stage of the CMA’s investigation.

Rajeev Suri, the CEO of Inmarsat, added his contribution: “There is no lack of competition in satellite connectivity for the aviation sector,” he said.

“Strong players are already offering in-flight connectivity and the new low-earth orbit (LEO) players – which already operate over half the satellite broadband capacity available globally – are aggressively and successfully targeting aviation.”

The CMA’s report appears to think that a move from the geostationary satellite operators such as Inmarsat and Viasat to the low Earth orbit (LEO) newcomers such as OneWeb and Starlink would be too difficult for airline operators.

Satellites companies “need certifications to be installed on each aircraft model, national licences around the world, and to scale up technology and support networks to cope with increasing volumes of data traffic”, it warns. “The evidence also shows that it is difficult for airlines to switch providers once they have installed an IFC solution.”

Suri said: “The highly complementary combination of Viasat and Inmarsat will support the UK government’s objective to drive growth by providing more jobs and investment in the UK space industry than we expect could be provided by Inmarsat as a standalone satellite communications provider.”