SES and Intelsat in merger talks

SES has confirmed that it is holding talks with Intelsat over a possible merger, a move that would continue a wave of consolidation in the satellite space.

The Luxembourg-based satellite operator issued a short statement substantiating rumours of tie-up talks that originated with Bloomberg. The newswire’s sources claimed that a deal could value the merged entity at north of US$10 billion including debt, adding that negotiations are at an advanced stage and an agreement could come in a matter of weeks.

Naturally, SES did not comment on the finer details.

“In response to rumours in the market, SES S.A. confirms that the company has engaged in discussions regarding a possible combination with Intelsat. At this stage, there can be no certainty that a transaction would materialise,” it said.

That last disclaimer certainly holds true with regard to this deal. Inmarsat and SES have been facing off in the courts for the past couple of years over the distribution of clearance payments from C-band spectrum in the US, to put it simply. Meanwhile, regulators would doubtless examine any transaction very closely indeed, particularly against the backdrop of ongoing satellite company consolidation.

US-based Viasat agreed to acquire the UK’s Inmarsat over a year ago via a $7.3 billion deal that is still attracting regulatory scrutiny. The European Commission opened an in-depth investigation into the deal last month, concerned about its impact on competition in the in-flight connectivity space. On a more positive note, the UK Competition and Markets Authority (CMA) earlier this month gave it the provisional green light after a Phase 2 investigation. The firms are doubtless hoping to clear all remaining regulatory hurdles as soon as possible.

Similarly, Eutelsat and OneWeb are eight months into their own merger attempt and are also navigating the regulatory process. Less than three weeks ago the pair also brokered a capacity agreement with Intelsat, a move that if nothing else demonstrates how important scale is becoming in this industry.

Much has been made of the increased competition in the sector resulting from SpaceX’s Starlink LEO offer, and it is indeed a factor in the way things are playing out.

MEO and GEO satellite operators like SES and Intelsat are looking to get into the LEO space, which is essentially making satellite broadband a viable option from both a cost and efficacy perspective. Equally, the fact that LEO services are becoming established is having a competitive impact on their existing businesses.

M&A is one way the satellite big guns can make themselves more competitive, regulation permitting. We could also see an increase in partnership deals going forward. And where satellite is concerned, there’s always the looming threat of a market shakedown; let’s not forget that Intelsat itself only emerged from bankruptcy protection just over a year ago. This market is starting to get interesting.

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