Viasat combines with Inmarsat in $7.3B satellite deal

Viasat and Inmarsat are hoping to take off by combining satellite forces in a deal valued at $7.3 billion.

Carlsbad, California-based Viasat is acquiring Inmarsat for $850 million in cash and 46.36 million of shares Viasat common stock valued at $3.1 billion, while taking on $3.4 billion in net debt.

The transaction is expected to close in the second half of 2022. It’s been approved by both Viasat and Inmarsat’s board of directors, and Viasat’s largest shareholder The Bauopost Group. It still needs approval from Viasat stockholders.

Viasat’s satellite services provides commercial aircraft with in-flight connectivity for Wi-Fi and, as of July 2021, served 590,000 fixed broadband subscribers in the U.S. It also provides capacity for commercial networks and supports government and defense systems.  

Inmarsat, meanwhile, has had plans for a communications mesh network that brings together existing geosynchronous (GEO) satellites, low earth orbit (LEO) satellites, and terrestrial 5G. Dubbed Orchestra, Inmarsat had anticipated spending $100 million in the next five years build it. Target customers are industrial wireless users in hard-to-reach places for maritime, aviation and defense industries.

The deal announcement came as Viasat released second quarter fiscal 2022 earnings.

For fiscal year 2021, government systems had brought in $1.1 billion in annual revenues for Viasat, down 6% year over year while in-flight and broadband satellite services brought in $869 million, up 5% over 2020.

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Now the pair will combine respective assets, including spectrum, satellites and ground, “into a high-capacity hybrid space and terrestrial network” for both the commercial and government sectors.

“This advanced architecture will create a framework incorporating the most favorable characteristics of multi-band, multi-orbit satellites and terrestrial air-to-ground systems that can deliver higher speeds, more bandwidth, greater density of bandwidth at high demand locations like airport and shipping hubs and lower latency at lower cost than either company could provide alone,” the companies stated in the announcement.  

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Viasat has a major presence in North America and it pointed to London-based Inmarsat’s strong distribution channels in the mobility, government, IoT and enterprise sectors. Inmarsat already provides connectivity and safety services to more than 1 million mobility and defense platforms.  

Viasat said that it’s committed to preserving and growing the investment of the company in the U.K. for space communications and working with the government to operate under earlier promises made by Inmarsat.

Inmarsat counts Nokia alum, including former chief executive Rajeev Suri and former CMO Barry French, among its leadership. Suri joined Inmarsat as its new CEO in February and in a statement Monday said that the Viasat deal is the right combination at the right time.

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“Viasat is a terrific innovator and Inmarsat brings some powerful additions: global reach, a broad distribution channel, robust business momentum and a presence in highly attractive global mobility segments,” Suri said. “The industrial logic is compelling and ensures that the U.K. has a strong and sustainable presence in the critical space sector for the long term.”

L-band spectrum, IoT

Inmarsat’s spectrum holdings cover the Ka-, L-, and S-bands, and Viasat also hopes to invigorate narrowband and IoT services.

Viasat President and CEO Rick Baldridge in a statement cited expanded scale, the foundation for significant positive free cash flow and potential upside from revitalizing L-band and IoT service growth through the deal.

“Plus, we will have expanded scale and presence in the $1.6 trillion broadband and IoT sectors. I’m excited about the opportunities ahead and looking forward to setting up the combined organization for long-term success,” Baldridge said.

According to the companies, a tie up will give more choice to customers for broadband and NB-IoT services, making new advanced mobile and fixed services available sooner in global markets.

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Together they will have 19 satellites in service, with 10 more spacecraft that are under construction and expected to launch within three years. A combined company would have a global Ka-band footprint (Viasat uses Ka spectrum as well), and L-band assets that support all-weather resilience and reliable narrowband and IoT services.

The announcement said Inmarsat’s L-band and existing space assets can be benefit from incorporating Viasat’s beamforming, end user terminal and payload technologies – with capabilities of a multi-band, multi-orbit hybrid space terrestrial network.  

“The unique fusion of teams, technologies and resources provides the ingredients and scale needed for profitable growth through the creation and delivery of innovative broadband and IoT services in new and existing fast-growing segments and geographies,” said Viasat’s Executive Chairman Mark Dankberg. “Inmarsat’s dual-band global mobile network, unique L-band resources, skills and capabilities in the U.K. and excellent technical and operational talent worldwide, are powerful complements to Viasat’s business.”

Decisions on management for the combined company won’t happen until after the deal closes, with Inmarsat’s team expected to stay on in the meantime to execute on strategy.