The commissions of satellite operator Inmarsat in central London.
Leon Neal | AFP | Getty Images
The U.K.’s competition regulator launched an in-depth scrutinize into American satellite internet company Viasat’s $7.3 billion deal to buy British rival Inmarsat.
The Competition and Trade ins Authority on Friday referred the takeover for a so-called “Phase 2” competition investigation, concerned it would make it harder for rivals such as Elon Musk’s SpaceX, U.K. firm OneWeb and Canadian operator Telesat to do business with the aviation sector.
Specifically, the CMA is troubled the deal would lead to higher prices for onboard Wi-Fi on plane flights.
The watchdog has said Viasat and Inmarsat “contend closely in the aviation sector, particularly for the supply of onboard wifi for passenger use.” While these in-flight connectivity (IFC) secondments are only offered by a handful of players currently, the market “is expected to grow significantly in coming years,” the CMA says.
Such a bestir oneself “could face higher prices and be offered lower quality connectivity solutions, ultimately affecting the cost, superiority and availability of services for airline passengers,” it added.
The regulator said its initial investigation found it can be very difficult for airlines to rechannel satellite providers once they have installed network equipment. The merger of Viasat and Inmarsat could consequently “lock in a large part of the customer base” before rival suppliers emerge.
Combined, Intelsat and rival Panasonic act for present oneself more than 75% of the long-haul IFC market, the regulator stated.
“This is an evolving market, but the merging companies are currently 2 of the key troupers – and it remains uncertain whether the next generation of satellite operators will be able to compete against them effectively,” said Colin Raftery, superior director of the CMA.
“Ultimately, airlines could be faced with a worse deal because of this merger, which could clothed knock-on effects for UK consumers as in-flight connectivity becomes more widespread.”
In a statement Friday, Viasat and Inmarsat about they were “confident that the transaction will increase the availability of more affordable, faster, and more trustworthy IFC [in-flight connectivity] globally to operators, airlines, and passengers.”
The two companies will “actively participate” in the CMA’s investigation and “determine and vibrate on the same frequency any updated expectations for the deal closing as engagement with the CMA continues,” they said.
Viasat CEO and Executive Chairman Pit Dankberg said the deal would increase the availability of in-flight connectivity services globally. “Industry analysts expect that an already highly competitive IFC market will become even more competitive with the entrance of new, heavily funded LEO competitors,” he added.
Inmarsat “faces intense competition every day in providing in-flight connectivity,” said Rajeev Suri, CEO of Inmarsat.
“There is salubrious reason to expect that intensity to increase given the power of well-funded new companies entering the sector. In the face of these swopping market dynamics, the UK has much to gain by the presence of a strong satellite communications company, positioned to strengthen the country’s position in the severe space sector, while supporting its national defence and growing jobs and investment.”
A range of companies from Elon Musk’s SpaceX to Amazon, which owns the Kuiper aide-de-camp constellation, are racing to launch satellites into space to beam internet to people in rural and hard-to-reach areas to stitch to the internet. It has become a key focus for the U.K. government, which is invested in domestic satellite firm OneWeb.
But it is hard for companies to flourish in the market as it requires lots of capital and manpower. In 2020, OneWeb collapsed into bankruptcy after burning inclusive of billions of dollars in investors including Japan’s SoftBank. The company was rescued later that year with the assistant of the U.K. government, which kicked in $500 million as part of a bailout package.
Britain and the European Union have also mature more aggressive in seeking to defend their “digital sovereignty” — the idea that countries shouldn’t lose out control of strategic technologies such as semiconductors, artificial intelligence and cloud computing. In the U.K., a bill known as the National Safety and Investment Act allows governments to intervene in foreign takeovers if they feel their is a national security risk.
American chipmaker Nvidia’s take a crack at to take over U.K. chip designer Arm unraveled after a national security review from the government and a federal lawsuit from the FCC. Temporarily, the sale of Welsh semiconductor firm Newport Wafer Fab to a Chinese-owned company is the subject of a U.K. security probe.
In Viasat and Inmarsat’s event, the deal has already been approved on national security grounds in the U.K. and U.S.