UK competition watchdog has concerns about Viasat’s Inmarsat takeover

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TAMPA, Fla. — Viasat’s $7.3 billion Inmarsat takeover could lead to more expensive and poorer quality Wi-Fi for plane passengers, the U.K.’s competition watchdog said Oct. 6 as it prepared to launch a full-scale probe of the deal.

The satellite operators have until Oct. 13 to offer a solution to allay the Competition and Markets Authority’s (CMA) concerns, or face an in-depth investigation that could push the timeframe for closing the deal well into next year.

The CMA’s initial assessment found the two satellite operators are “currently the strongest” providers of inflight connectivity (IFC) available to airlines.

While SpaceX, OneWeb, and other new players plan to provide IFC services from non-geostationary orbit (NGSO), the CMA is uncertain any of them could effectively compete against the merged company.

SpaceX won a contract with Hawaiian Airlines in April to provide Wi-Fi services next year. Still, the regulator believes NGSO operators “face many financial, operational, technical, regulatory, and commercial barriers before they can supply IFC services on board aircraft.”

Incentives to overcome these barriers are not unlimited, the CMA added, and NGSO operators still need to see if they can achieve a return on investment in aviation. 

Because it is difficult for airlines to switch providers once they have installed IFC antennas on their aircraft, the watchdog is also concerned Viasat and Inmarsat could lock out a large part of the customer base before services from NGSO become credible.

Viasat and Inmarsat’s IFC businesses are vertically integrated, giving them tighter control of the prices they charge for their services.

IFC first-mover Panasonic’s high share of supply is declining because it relies on third-party satellite operators for capacity, according to CMA, “and airlines’ perception that it is expensive and offers old technology.”

Anuvu seeks to deploy its own constellation to support IFC services it provides through leasing capacity from third-party satellites; however, the watchdog said it “competes only for short-haul flights and is considered a weak option by airlines.” 

Intelsat “occupies a modest position in the market,” the regulator continued “and it is uncertain how it will develop in the future” following the operator’s emergence from bankruptcy in February. 

Intelsat recently signed a global distribution deal with OneWeb to provide multi-orbit inflight connectivity solutions for airlines by 2024.

Viasat had said it was possible it could close its acquisition of Inmarsat by the end of 2022, however, an in-depth investigation from the CMA can take several months to complete.

California-based Viasat and London-headquartered Inmarsat did not indicate any plan to offer remedies in a joint statement following the regulator’s announcement. 

“There is no lack of competition in satellite connectivity for the aviation sector,” Inmarsat CEO Rajeev Suri said.

“Strong players are already offering” IFC, he added, and NGSO “players —which already operate over half the satellite broadband capacity available globally—are aggressively and successfully targeting aviation.”

He said the merged group “will be well-placed to invest in the technologies needed to meet the growing needs of aviation customers and compete” with NGSO operators and others.

Viasat CEO Mark Dankberg said the CMA’s decision to open a more in-depth investigation “is not unexpected, even though IFC represents less than 10% of the revenues of the combined company.”

He said: “This is still a nascent, dynamic, and rapidly evolving business, with existing providers and extremely well-financed new entrants bringing new technologies and new business models to increase adoption among airlines, passengers, and aircraft types.”

The operators announced their proposed deal in November, and it has already secured several key approvals from both sides of the Atlantic Ocean, including British national security clearance and permission from the Committee on Foreign Investment in the United States (CFIUS).

However, the takeover remains subject to clearances from authorities in addition to the CMA, including the U.S. Federal Communications Commission and Justice Department.

In July, the European Commission said the deal also needs antitrust approval from the European Union.