Viasat-Inmarsat merger raises onboard Wi-Fi competition concerns

blue lineart of satellites orbiting earth
Image: pickup/Adobe Stock

The global satellite communication industry has witnessed massive growth in recent years. A 2022 Fortune Business Insights report revealed that the global satellite communication market size was $23.44 billion in 2020 and is expected to exceed $46.5 billion by 2028, with a compound annual growth rate of 9.07% over the forecast period.

Some of the factors that have triggered this growth include the rise in military dependence on satellite communications, high demand for a range of applications like radio broadcasting, wireless communication, remote sensing, water monitoring, space navigation and other next-generation technologies.

With this growth rate, it’s no surprise that we have been treated to several industry mergers and acquisitions announcements. However, while some announcements in the industry have not created much fuss, the Viasat-Inmarsat merger has, since last week, rattled the global news space and raised competition concerns for the U.K.’s Competition and Market Authority.

Since the two companies announced a $7.3 billion merger deal about a year ago, the U.K. regulatory body has become jittery over the problems the deal might leave in its wake for other investors and airline users if allowed to go on.

Why are there concerns over the deal?

A Competition and Markets Authority investigation revealed that Viasat, a U.S. giant in satellite communication, and Inmarsat, a renowned British satellite telecommunications company, are two key players in the satellite communications industries. Records show that they provide businesses with satellite and mobile connectivity that enable internet, video calling and emailing services. Since the two companies have been competing closely over the years, this merger will eliminate this rivalry.

“This is an evolving market, but the merging companies are currently two of the key players—and it remains uncertain whether the next generation of satellite operators will be able to compete against them effectively,” explained CMA senior director Colin Raftery. “Ultimately, airlines could be faced with a worse deal because of this merger, which could have knock-on effects for U.K. consumers as in-flight connectivity becomes more widespread.”

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Further investigation by the regulator revealed that if the merger is allowed to go on, it will become difficult for airlines to switch from one provider to another after installing a connectivity solution. In addition, the CMA is concerned that the loss of competition in the sector will hurt U.K. businesses and consumers. For example, airlines might be forced to pay more and receive connectivity solutions of lower quality, which would ultimately impact the price, availability and quality of service for passengers.

What’s next for Viasat and Inmarsat?

In the face of this development, both firms have been given five working days to tender a proposal to address all of the CMA’s competition concerns. When this is done, the CMA will spend a couple of days considering whether to allow the deal to carry on or subject it to an in-depth phase two investigation.

Despite being faced with the possibility of losing CMA’s backing to proceed with the merger, Viasat and Inmarsat have stated that they are confident the deal will benefit airlines, passengers and enterprise users of in-flight connectivity in the aviation business.

“There is great interest in ubiquitous, high-performance, affordable IFC, so the CMA’s decision to proceed to a Phase 2 review is not unexpected, even though IFC represents less than 10% of the revenues of the combined company,” stated Mark Dankberg, CEO and executive chairman of Viasat. “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.

“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—and to reach a satisfactory conclusion in Phase 2.”

Inmarsat CEO, Rajeev Suri, also gave his opinion, pointing out why the deal should be allowed to stand.

“There is no lack of competition in satellite connectivity for the aviation sector. Strong players are already offering in-flight connectivity, and the new low-earth orbit players—which already operate over half the satellite broadband capacity available globally—are aggressively and successfully targeting aviation,” said Suri. “We expect competition to be robust in the years ahead, and together, Viasat and Inmarsat will be well-placed to invest in the technologies needed to meet the growing needs of aviation customers and compete with the LEOs and others.”

What the merger could bring to the market

The satellite and telecommunication industry already has some big names, such as Elon Musk’s Starlink, Amazon’s Kuiper, and OneWeb and Telesat. However, with the Viasat and Inmarsat merger, there could be a major market shake-up.

Starlink and Kuiper have gained traction for their recent moves to bet on cheaper and smaller satellites that operate from low-earth orbit. This shows that these big players are not slowing down regarding adopting more technologies that would scale their business. Again, with the internet rife with news of Starlink and Kuiper’s push to drive their expansion into the aviation industry, the Viasat-Inmarsat merger could stand as worthy competition.

Meanwhile, other news suggests that more competition will soon hit the satellite communication market, as U.K.-based OneWeb and French rival Eutelsat recently announced they had signed an initial merger deal that could help them challenge the cash-rich players in the industry. Nevertheless, with all these potential competitors gravitating towards providing satellite connectivity in the aviation sector, it remains to be seen whether the CMA would allow the Viasat-Inmarsat merger to stand or otherwise.

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