SES and Intelsat call off merger talks

A deal to combine two heavy hitters in the geostationary satellite market is off the table.

SES confirmed in a brief statement on Thursday that talks to merge with rival Intelsat “have ceased.”

They had been trying to hammer out a deal since late March, with Bloomberg sources at the time valuing the potential transaction at more than $10 billion. But it appears they were unable to reach an agreement.

Had they come to some sort of arrangement, it would have created a behemoth with more than 125 satellites at both geostationary (GEO) and medium-Earth orbit (MEO).

That would have helped Intelsat in particular, since it doesn’t have any MEO, let alone low-Earth orbit (LEO) satellites. SES on the other hand is in the process of upgrading its MEO constellation with its second-generation satellites, called O3b mPower. It plans to launch 11 satellites in total; the third and fourth blasted off in late April.

Intelsat is relying on partnerships to augment its coverage. Last August, it struck a deal with LEO operator OneWeb to add extra capacity to its in-flight connectivity services with the latter’s network. It followed that up in March, establishing a broader capacity agreement with Eutelsat and OneWeb.

With a crop of LEO satellite providers like Starlink and the aforementioned OneWeb securing deals left, right and centre – and with ambitious new satellite direct-to-device (D2D) providers like Lynk joining the fray – a merger would have given SES and Intelsat the scale to compete more aggressively on price, coverage and throughput. Lets not forget either that Amazon has big plans when it comes to the LEO satellite market too.

Merging would have also helped both SES and Intelsat fend off the competitive threat posed by Viasat, which has just become significantly larger after its $7.3 billion deal to swallow up rival Intelsat cleared its final regulatory hurdle.

Thursday’s development could be interpreted one of two ways when it comes to Intelsat in particular. On the one hand, it might suggest that the company is confident about its future prospects and current financial footing, and is therefore not desperate to do a deal. Intelsat emerged from bankruptcy last February, after almost two years of trying to come up with a restructuring plan that everyone could agree on.

However, you could also hypothesise that SES was given a peak of Intelsat books and didn’t like what it saw.

Either way, with the satellite market becoming increasingly crowded by new LEO players, and with Viasat completing its purchase of Inmarsat in late May, SES and Intelsat will be under intense pressure to perform.

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