Consolidation wave pushes rivals SES and Intelsat into merger talks

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TAMPA, Fla. — SES and Intelsat are in active merger talks as a wave of consolidation sweeps over the satellite industry, the Financial Times reported Aug. 4.

The satellite fleet operators are discussing the structure of a potential combination to improve competition against SpaceX’s Starlink broadband constellation, the report said, citing sources that stressed there is no guarantee a deal will be reached.

A merged group would generate $4 billion in revenues, and follow plans Eutelsat and OneWeb announced last week to combine their businesses. 

Viasat is also close to completing its $7.3 billion plan to acquire Inmarsat this year following regulatory approvals.

Intelsat and SES won’t say whether they are discussing a merger, but both companies acknowledged paying close attention to industry consolidation. 

“We do not comment on rumors and speculation,” Intelsat spokesperson Clay McConnell said.

“Nonetheless, it’s clear that our industry is transforming, with new capabilities and technologies being brought to the market. Intelsat is focused on being a leader in that transformation.”

He said “partnerships among satellite communications companies and bringing together complementary capabilities can drive competition” in the connectivity market. 

SES CEO Steve Collar made similar comments when asked about the reported negotiations during the company’s Aug. 4 financial results for the second half of 2022.

Collar said, generally, satellite “industry consolidation is a good thing” that will help rationalize the market.

“Of course, from an SES standpoint, we will do things only in the best interests of our shareholders, and we’ll just leave it there,” he added.

The Luxembourg-based company’s shares fell as much as 10% following the Financial Times report, despite announcing financial results that beat analyst expectations. 

SES generated 899 million euros ($916 million) in revenues for the first six months of 2022, down 2.1% compared with the same period last year when adjusted for foreign exchange rates.

The decline was driven by a 7% year-on-year drop in underlying video revenues to 501 million euros.

Video continues to provide the bulk of the operator’s revenues, although its connectivity-focused networks business has been catching up in recent years. 

Underlining revenues for the SES’ networks business increased 2.1% to 387 million euros.

Government revenues fell 7.5% to 146 million euros for the six months to the end of June.

SES announced Aug. 1 that it had completed its acquisition of DRS Global Enterprise Solutions, a provider of satcoms services to the U.S. government, in a deal that would double its government business.

Group adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, dropped 3.8% to 545 million euros.

SES also announced another delay for its O3b mPower constellation, the operator’s next-generation constellation in medium Earth orbit.

The operator had been planning to deploy six of 11 Boeing-built O3b mPower satellites across three SpaceX launches between July and September.

However, these satellites are now slated to launch between October and December.

Collar said SES is going to have “to be a little more patient than we would like, but the good news is that we’re fully locked on for three launches this year, and have a solid in-service date for [the second quarter of 2023],” adding that the delay does not change its growth trajectory.

As for Intelsat, the U.S.-based company emerged from bankruptcy in February after a restructuring deal that cut its debt from $16 billion to $7 billion.

The operator appointed David Wajsgras as CEO in April, who has been building out a new leadership team to guide a connectivity-focused growth strategy with this lighter debt load.

Intelsat and SES are also in line for nearly $9 billion in combined proceeds for clearing C-band spectrum for terrestrial cellular operators. 

Notably, they have also been locked in a long-running legal battle over how those proceeds should be split between them.