Plenty of operational synergies await SES and Intelsat if the world’s largest fixed satellite service (FSS) providers can craft a merger able to clear regulatory scrutiny.
Following years of industry speculation, SES confirmed it was in early talks about combining with Intelsat on March 29, shortly after Bloomberg reported a deal could be just weeks away.
A merger would bring together more than 70 satellites SES has across geostationary and medium Earth orbit with Intelsat’s more than 50 geostationary satellites, forming a company exceeding $4 billion in annual revenues.
Pooling resources would help them rationalize their fleets as capacity prices come under pressure from a flood of satellites coming to orbit.
High throughput satellites supplied around 2.7 terabits per second (Tbps) of capacity across geostationary and non-geostationary orbit (NGSO) in 2021, according to Northern Sky Research. This jumped to nearly 21 Tbps in 2022 and is on track to more than double to around 43 terabits next year.
By the end of the decade, Northern Sky Research projects high throughput satellites will be beaming some 383 Tbps of capacity to Earth. Most of this capacity will come from NGSO constellations, although its analysts say only 20-30% is sellable, given that most of it would be over oceans.
SES cautioned “there can be no certainty” that a transaction would materialize.
But while rumors of an impending merger have been doing the rounds for years, Quilty Analytics analyst Caleb Henry said stars have recently started aligning for the deal.
Intelsat is no longer saddled with such a colossal debt load since emerging from bankruptcy last year, Henry noted, and joining SES would give it a multi-orbit capability it is currently seeking through a partnership with OneWeb, which is in the middle of being sold to Eutelsat.
Intelsat’s post-restructuring ownership structure as a privately held company also appears to have made it more receptive to mergers and acquisitions (M&A).
Speaking at the Satellite 2023 conference March 14 in Washington, Intelsat CEO David Wajsgras said the company was looking at M&A of “varying sizes, and we will not shy away from opportunities that generate real value for all our stakeholders.”
For SES, Henry said a merger would help the company get its hands on billions of dollars of C-band spectrum clearing proceeds that have long been a point of contention between the two operators.
“Sometimes a merger is a nice way to settle a massive dispute,” said Armand Musey, founder of advisory firm Summit Ridge Group, “it’s kind of the opposite of human relationships.”
However, SES and Intelsat are arriving late to the consolidation party.
Regulators were concerned about global operator consolidation even before Viasat kicked off the latest round of deal-making in November 2021 with plans to buy Inmarsat.
“The challenge, of course, is that [SES and Intelsat] are the two largest FSS operators in the world,” Musey said, “that creates market concentration concerns.”
The merger’s fate would depend on how regulators define their market against the growing dominance of Starlink’s NGSO broadband constellation.
They would “have a much better chance” of clearing their deal if satellite operations and bandwidth are considered in broad terms, Musey said, rather than specific verticals — such as how Viasat’s deal is being treated.
While the U.K. ultimately cleared Viasat-Inmarsat after probing how their combination could affect the market for providing Wi-Fi on planes, Europe’s investigation into this vertical continues.
Some of the markets SES and Intelsat operate in would be even more concentrated if the Viasat-Inmarsat deal is approved, including aviation and maritime.
Of particular concern to regulators could be SES and Intelsat’s heavy presence in the TV broadcast market in North America, according to Musey, who said they could look to sell satellites to other operators in the region to help get a deal through, such as to Eutelsat or Telesat.
A merger would also need to navigate the interests of Luxembourg’s government, which controls about a third of the voting rights in Luxembourg-headquartered SES. Intelsat is based in the United States, but its company is registered in Luxembourg, which Musey said should help their negotiations.
“The space industry is a huge source of pride for Luxembourg … and this deal doesn’t seem to really jeopardize that in any way,” he added.
This article originally appeared in the April 2023 issue of SpaceNews magazine.