SES CEO thinks satellite industry consolidation likely
MOUNTAIN VIEW, Calif. — The chief executive of satellite operator SES says consolidation of the satellite industry is more likely than ever to improve its overall return on investment, but that the structure of the industry might hinder such deals.
Speaking at the Satellite Innovation conference here Oct. 5, Steve Collar addressed growing perceptions that the industry is ready for a wave of deals like the unsolicited proposal by telecom magnate Patrick Drahi last week to acquire Eutelsat for $3.2 billion. While Eutelsat rejected the deal, it appeared to leave the door open for a revised, higher offer.
While not addressing that specific deal or others, Collar said he thought some kind of industry consolidation was possible. “I think it’s more likely than it’s ever been,” he said. “But, it’s been likely in the past and hasn’t happened.”
He said “structural reasons” had blocked consolidation in the past and were still possible. “Whether that’s driven by their shareholders’ valuations, other reasons, regulatory, it doesn’t happen,” he said of consolidation, but concluded that now “it will happen, more likely than not.”
Collar thinks SES is in “a great spot” if there is a wave of deals, citing the upcoming O3b mPOWER satellites and up to $4 billion in payments for clearing C-band spectrum in the United States, but declined to say if the company would seek to buy other companies in the industry.
Other operators have been more open about the prospect of acquisitions. At the Satellite 2021 conference a month ago, Hadi Alhassani, vice president and chief strategy officer of Arabsat, said his company is evaluating a couple potential acquisitions of other regional satellite operators. “To be honest, this is a good time to acquire,” he said then. “There are good deals out there in GEO.”
A panel earlier in the day at Satellite Innovation also believed that consolidation was likely. “Certainly, there are large companies seeking to pick up vibrant, growing companies that bring new capabilities to the table,” said Carissa Christensen, chief executive of BryceTech.
There will also, she added, be acquisitions of companies “aren’t performing well or can’t hit their marks but have developed attractive technology.” The combination of those two kinds of deals “will characterize the industry over the next few years.”
Collar said consolidation could address inefficiencies he sees in the market. “Return on investment capital is challenging in this industry. If you want investors to bring money to any given industry, you have to prove you’re responsible with that investment, and I think the fragmentation of the industry makes that challenging,” he said.
That fragmentation, he warned in his talk, was a major problem for the satellite industry as it seeks a bigger role in the broader telecommunications field. “One of the challenges that we have as an industry is that we are still relatively fragmented,” he said, lacking the scale to be competitive.
Each satellite operator can talk about the strengths of their networks, he said. “The challenge with that is that probably none of us have the scale that is necessary to deliver sustainably good customer solutions. That issue of fragmentation, in my view, is a threat to us all in terms of the viability of space to deliver great solutions to our customers.”