Viasat Expands its Portfolio with Inmarsat Acquisition

American-based global communications company, Viasat, has recently announced its plan to acquire British satellite communications company, Inmarsat, in a US$7.3 billion deal. This “transformative” deal, as described by Viasat, is expected to facilitate value creation of US$1.5 billion through cross-selling and leveraging synergies between capital and operating expenditure. Viasat is intending to retain and expand Inmarsat’s presence in the United Kingdom (UK) by continual investments through collaborating with the government. The acquisition is comprised of US$850 million in cash, 46.36 million Viasat shares that are worth approximately US$3.1 billion, and an estimated US$3.4 billion of net debt. The companies described their combination as one that would establish a “leading global communications innovator with enhanced scale and scope to affordably, securely and reliably connect the world”, that could deliver advanced new services in the fixed and mobile telecom service sectors.

Viasat’s executive chair, Mark Dankberg, described that the combination of the two companies is expected to significantly expand the Total Addressable Markets (TAM) for Internet of Things (IoT) and broadband that could be tapped on, from US$985 million in 2020, to potentially US$1.6 trillion by 2030, contributing to a Compound Annual Growth Rate (CAGR) of approximately 5%. He further highlighted the prospects of greater growth, considering that a substantial portion of the market is currently unserved or underserved.

This can be attributed not only to the strong potential in existing markets such as aviation, energy, and broadband, but also prospective new markets including security, digital inclusion, and mobility, such as drone deliveries and air taxis. The integration of satellite and terrestrial assets seek to deliver a comprehensive set of services with enhanced network performance including higher speeds and greater bandwidth to customers, especially for high-demand areas such as shipping hubs and airports.

The combined company has the potential to offer a wide portfolio of spectrum licenses that span across the S-, Ka-, and L-bands, with an existing fleet of nineteen operational satellites and another ten spacecraft that are planned to be launched within the next three years. Inmarsat’s L-band spectrum and existing space assets could complement Viasat’s beamforming, and hybrid multi-orbit space-terrestrial networking capabilities. Leveraging the L- and Ka-band assets would provide support for all-weather resilience and highly reliable, narrowband and IoT connectivity, and bandwidth-intensive applications.

Viasat’s intended collaboration with the UK government is expected to introduce additional spatial capabilities and other advanced technologies to the nation, while creating new career opportunities for advanced engineering and related positions in the long run. The company also plans to retain and grow Inmarsat’s London headquarters, while preserving its presence across Canada, Australia, Europe, Africa, the Middle East, and Asia Pacific.

The satellite communications sector has entered a new stage of dynamic market demand that is fast-growing and significantly fragmented with new opportunistic entrants. The launch of new satellite constellations and the diversification of services from traditional satellite service operators further intensified market competition.

On that front, scalability and scope become the differentiating factors for industry players to affirm their own competitive position. The addition of Inmarsat, which has been providing global connectivity services with fourteen satellites in orbit, has potential to boost Viasat’s presence and broaden its distribution channels in support of the company’s international expansion. A key consideration for such acquisition lies in the interoperability of systems, which provides synergies to enable value creation.

Viasat’s successful acquisition could see more consolidation efforts to follow as operators observe and attempt to find a firm ground in the highly competitive space communications industry. However, there are possible hurdles which could affect Viasat’s acquisition and other similar takeovers, such as in obtaining regulatory clearances where the acquired entities could be involved in business of national interests. Inmarsat, for example, had supplied satellite communication services to the UK Ministry of Defense to improve ground communications for soldiers deployed in the Middle East and commutation services for ships. Therefore, such strategic acquisitions are likely subjected to regulatory scrutiny under the grounds of national interest.

While looking to raise their scalability, operators could explore new connectivity applications. ABI Research’s forecasts expect that the global IoT market would grow from 8.4 billion connections in 2021 to 23 billion connections by 2026, garnering a CAGR of approximately 23%. Furthermore, with global revenue forecasts from IoT connection set out to grow from US$11 billion in 2021, to US$29 billion by 2026. IoT connectivity for one, would be a prospective opportunity for operators to investigate in establishing their edge among the intensified competition.