TAMPA, Fla. — The U.K launched an in-depth probe Oct. 14 that will likely delay Viasat’s plan to buy Inmarsat, following concerns it could harm competition in the fledgling inflight connectivity (IFC) market.
The U.K.’s competition watchdog kicked off the investigation after giving the satellite operators a chance to alter the $7.3 billion deal, which it says could lead to more expensive and poorer quality Wi-Fi for airline passengers.
However, the companies argue their combination would lower costs and increase efficiencies to make IFC more affordable, faster, and more reliable.
U.S.-based Viasat announced plans to buy the British satellite operator nearly a year ago. It had hoped to complete the takeover before the end of this year to expand its broadband network globally.
That now seems unlikely following the Competition and Markets Authority’s (CMA) decision to refer the plan to what is known as a Phase 2 investigation in the United Kingdom.
The CMA expects to conclude this review and issue their report by March 30, but could extend that deadline if circumstances warrant.
Viasat and Inmarsat are confident they can show the CMA how combining forces would not negatively impact competition in the IFC market, they said in a joint statement Oct. 14.
According to the CMA’s initial assessment released last week, the two satellite operators are “currently the strongest” providers of IFC that are available to airlines.
But Viasat and Inmarsat pointed to how Panasonic and Intelsat combined still represent more than three-quarters of the long-haul IFC market.
The CMA is also concerned that SpaceX, OneWeb, Telesat, and others planning to enter the IFC market with services from low Earth orbit (LEO) could struggle to compete with the combined group.
According to Viasat and Inmarsat, the more than $20 billion in capital these new market entrants have raised over the last three years underlines the intensity of the competition coming to the market.
“Industry analysts anticipate that an already highly competitive IFC market will become even more competitive with the entrance of new, heavily financed LEO competitors,” Viasat CEO Mark Dankberg said in a statement.
“We believe that a comprehensive Phase 2 analysis will support that our transaction will benefit the nascent, but rapidly growing IFC services available to airline passengers.”
Inmarsat CEO Rajeev Suri added: “Inmarsat faces intense competition every day in providing in-flight connectivity. There is good reason to expect that intensity to increase given the power of well-funded new companies entering the sector.”
The takeover requires regulatory approvals in addition to the green light from the CMA, including permission from the U.S. Federal Communications Commission and Justice Department.