Monday, January 24

Musk’s space boost forces his satellite rivals into a fusion mode

Elon Musk and Jeff Bezos’ plans to put thousands of satellites into orbit are forcing an industry traditionally wary of mergers to prepare for consolidation.

The billions of dollars that Musk is pouring into his Starlink broadband internet service are skewing the economy of space for companies like SES SA, the world’s second-largest satellite operator by sales. The growth of streaming through fiber optic networks threatens another of its pillars: satellite television.


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This year’s industry acquisitions, investments and joint ventures have already surpassed 2020, with more than $ 3.6 billion spent on them so far in 2021, according to data compiled by Bloomberg.

“I’m sure everyone is talking to everyone,” said SES CEO Steve Collar. Space is “essentially a fixed-cost industry, so the scale that comes from consolidation can be financially important. And obviously we’ve seen some disruptors enter the industry as well. That can also be a catalyst, ”he said in an interview.

ViaSat Inc. president Mark Dankberg said “there is certainly discussion” in the industry about mergers. “One of the reasons for the consolidation would be to try to divert more capital funds from transmission to broadband.”

While industry executives downplay Musk’s threat, they are adapting. Companies such as Inmarsat Holdings, ViaSat, Eutelsat SA and Telesat plan to launch high-performance or low-latency satellites to offer their own broadband services to businesses and homes. But each launch is an expensive bet that customers will not opt ​​for other technologies. The combination of forces would make these deployments more efficient.

The UK’s largest satellite company Inmarsat “probably has a lot of interested dance partners,” CEO Rajeev Suri told Bloomberg last month in an interview about his plans for a new network with Earth orbit technology. low similar to Starlink.

Musk’s Space Exploration Technologies Corp. was valued by investors this year at $ 74 billion. Last year, Morgan Stanley analysts said Starlink accounted for four-fifths of SpaceX’s value. That would make Starlink about twice the combined market value of the world’s largest publicly traded satellite companies.

“Eutelsat and SES were the giants, but now compared to Elon Musk and Amazon’s potential to invest in this industry, they are very, very small, and they don’t have the leadership in new technology,” said David, an analyst at Kepler. Cheuvreux. Cerdan.

He said Eutelsat should merge with SES if the respective governments of the countries can agree on control, as they share the problem of reducing broadcast TV revenues.

Corporate rivalries and political sensibilities have tended to hamper satellite mergers. While the largest companies have been on the verge of consolidating in recent years, the great ties have failed. Billionaire Charlie Ergen’s EchoStar made an offer for Inmarsat in 2018 and France’s Eutelsat also considered buying it. The company was eventually acquired by a group of pension funds and private equity.

Business Market cap Recent Offers
ViaSat $ 3.6 billion
ITS $ 3.7 billion
Inmarsat $ 3.4 billion * * 2019 purchase price
Eutelsat $ 2.6 billion Invested 550 million dollars in OneWeb in April
Intelsat $ 60 million In Chapter 11. I bought the GoGo aviation unit for $ 400 million in 2020
EchoStar $ 2.1 billion Hughes subsidiary invested $ 50 million in OneWeb in 2020
Loral (majority owner of Telesat) $ 1.2 billion Canada invests $ 1.1 billion in LEO satellites

Additional catalyst

Funds are coming in for more deals, with SES and Intelsat SA online to receive a total of $ 9 billion to lease radio waves for use by U.S. phone companies. The funds that Inmarsat acquired in 2019 received payments from Spectrum lagged $ 700 million last year, lowering the bar for them to get a purchase price return of $ 3.4 billion.

The industry’s new appetite for partnerships has already benefited Musk’s UK-based rival OneWeb, which has launched hundreds of its own small low-Earth orbit satellites and has global rights to radio waves. It has attracted a consortium of owners, including Ergen’s Eutelsat and Hughes Network Systems. Intelsat tried to buy OneWeb as early as 2017, but is currently barred from deals as it goes through bankruptcy.

OneWeb CEO Neil Masterson told Bloomberg that he wants the company to be in the strongest position for an “inevitable restructuring” of the industry.

© 2021 Bloomberg

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