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Breaking Down the SES/Intelsat Deal: Analysts Review Multi-Orbit Assets and Competitive Effects

By Mark Holmes | May 2, 2024

Photo: SES

Though it long had been the subject of rumors, SES‘s agreement to finally acquire Intelsat still sent shockwaves through the satellite industry as the result will see the merge of two iconic global operators. Via Satellite spoke to a number of analysts to analyze the deal from the strength of the operators’ multi-orbit assets, to how it will impact competition with Starlink.

This roundtable includes Daniel Welch, co-founder and senior consultant of Valour Consultancy; Luigi Scatteia, partner, Space Practice Global Lead for PwC; Frost & Sullivan analysts Arjun Sreekumar, consulting director, Middle East & Europe, Growth Advisory, Aerospace & Defense and Pravin Pradeep, industry analyst, Aerospace & Defence; and Lluc Palerm, research director for Analysys Mason.

VIA SATELLITE: What is your initial reaction to SES acquiring Intelsat? Did you think it was inevitable?

Welch: There was a sense of inevitability about this acquisition, factoring in the initial discussions on a potential merger last year, the scale of disruption caused by Starlink, and M&A activity around both companies, notably Viasat’s acquisition of Inmarsat, and Eutelsat acquiring OneWeb.

Scatteia: Over the years there has been strong M&A activity in the market, and we have been saying this for a very long time that a new wave of M&A is expected as Low-Earth Orbit (LEO) constellations become stronger. Recently, some significant deals have emerged, such as Eutelsat’s merger with OneWeb and Viasat’s acquisition of Inmarsat.

Pradeep: The SES acquisition of Intelsat marks a strategic consolidation in the satellite communications industry, driven by the disruptive emergence of LEO constellations like SpaceX’s Starlink and Amazon’s upcoming Project Kuiper. These new entrants have compelled traditional Geostationary Orbit (GEO) and Medium-Earth Orbit (MEO) operators to innovate rapidly, merging SES’s advanced MEO capabilities with Intelsat’s extensive GEO coverage to better compete in high-throughput, multi-orbit offerings. However, the deal faces skepticism due to its potential to increase debt burden amidst high capital expenditure needs, with market reactions reflecting concerns over its capacity to challenge dominant U.S. players effectively.

Palerm: Discussions have been back and forth for years. These two companies were bound to reach an understanding at some point, and given the turbulent market for GEO operators, such a combination is quite logical.

VIA SATELLITE: Do you think this combination makes sense and a combined entity will be able to compete better with the likes of Starlink and Amazon?

Welch: From a mobility perspective, this does make sense. Intelsat has direct relationships with end users and a LEO partnership with OneWeb that when combined with SES assets in GEO and MEO, gives the latter plenty of optionality to compete with. I don’t personally feel it changes much in the context of competing with players like Starlink as in markets where LEO-only is favored, such as maritime and in specific segments of the business aviation sector, it’s difficult to compete with the price, simplicity, and halo effect of SpaceX. We see this as strengthening [the combined company] in premium mobility markets, most notably commercial aviation where until now it has played a discrete role.

Scatteia: The merger is highly strategic, particularly when considering the spectrum resources and the enhanced capabilities derived from integrating GEO + MEO assets. This combination positions the them to compete more effectively with major players like Starlink and Amazon by broadening their service offerings and technological edge. When it comes to competing with LEO operators, price competitiveness is crucial, especially for providing connectivity to enterprises in remote areas or for consumer broadband markets, which is currently a unique selling point of LEO services.

Pradeep: The merger between SES and Intelsat equips the combined entity to compete more effectively with the likes of SpaceX’s Starlink and Amazon’s Project Kuiper. The merger between SES and Intelsat strategically positions the combined entity as a robust multi-orbit operator, leveraging their expanded capabilities across GEO, MEO, and LEO orbits — the latter through their partnership with Eutelsat OneWeb. This integration enables them to provide a seamless array of services tailored to diverse applications. While Starlink and Project Kuiper aim to dominate the broadband market with massive constellations offering global coverage, SES and Intelsat’s combined infrastructure, partnerships, and enhanced service capabilities position them to offer competitive alternatives that can be attractive to customers looking for solutions that LEO constellations might not offer, such as higher reliability and differentiated services in the government and high-mobility sectors.

Palerm: The combination makes sense from multiple perspectives: Scale offers certain advantages in the current market environment. The combination will dominate approximately 30% of the traditional GEO market. Both companies started a move to get closer to end users through managed services and end-to-end services. This builds some barriers to entry against Starlink and other entrants. Intelsat was developing those mainly in aero and backhaul, while SES was ahead in maritime and gov/mil.  The combined entity will be able to achieve cost synergies via fleet optimization.

VIA SATELLITE: How do you like the combination of GEO and MEO assets in this combination? Intelsat also has a partnership with OneWeb? What do you think the LEO play will be here?

Welch: As far as Intelsat’s relationship with OneWeb goes, we expect this avenue to remain intact. SES doesn’t, for now at least, have a LEO option and we know this is top of mind in every mobility vertical right now so having a LEO option to take to market is a positive outcome. In the years ahead, it makes sense that SES uses the improved positioning and commits to deploying a LEO-based service of its own to fulfill the multi-orbit story, going head to head with Starlink and Amazon.

Scatteia: The combination of GEO and MEO assets in this merger is particularly appealing to certain high-demand sectors such as government and defense, which require robust multi-orbit and multi-band solutions. under the combined entity the network is expected to scale significantly thus providing the new entity with an edge. While SES has long provided these GEO + MEO capabilities, acquiring Intelsat and GoGO through this deal will significantly enhance SES’s position in the aeronautical market. As for the LEO strategy, it currently focuses on utilizing capacity from OneWeb through the Intelsat partnership. This arrangement will undoubtedly bolster the combined entity’s ability to offer a resilient, multi-band, and multi-orbit network. There could be a LEO play in the future, however, it seems increasingly likely that future moves might involve investing in an existing LEO operator.

Palerm: SES-Intelsat will be strongly positioned to offer multi-orbit services. Each orbit has its advantages and challenges, and the value in the industry is pivoting from assets to networks and services. They both were already moving in the direction of combining multiple architectures under the same network/service. Although it is still unproven that this can be a differentiator in the market and add value to end-users. Intelsat publicly discussed their plans for a MEO constellation. We look forward to seeing if the combined entity has the sufficient scale to develop its own LEO project or what would be their supply and target markets strategy going forward.

Also, they both have been active in pushing for the integration of satellite in the 3GPP standardization body. We hope this merger helps putting more emphasis on this, instead of them deciding to opt for proprietary closed systems leveraging their scale. The development of 3GPP standards would be good for the whole industry and is critical to unlocking new high-growth segments like the connected car.

VIA SATELLITE: How does this move shake up the global satellite landscape?

Scatteia: The combined entity will now also be able to compete much strongly with other strong GEO players such as Viasat. Especially considering that there will be four more HTS satellites from Intelsat between 2025-2026 timeframe, and in the same timeframe mPOWER satellites are also expected to be launched and in operation by SES.

Palerm: After this announcement, there will likely be a pause for large-scale M&As between satellite operators. It remains to be seen how regional actors react. Interestingly, the industry seems to be more open to collaboration with agreements like Thaicom-Eutelsat, Intelsat-OneWeb. There is also the example of the Mobile Satellite Services Association (MSSA) in the MSS market to develop a D2D solution. It is sometimes difficult to see M&As between regional operators due to the national interest in them, but closer collaboration and shared investments are plausible.

VIA SATELLITE: How do you view the significance of this deal?

Welch: It’s another seismic deal with two powerhouses of the satellite world coming together but it can be argued this doesn’t really change the state of play from a mobility perspective, other than to bring the SES brand to the fore. We do expect to see the Luxembourg company competing hard for opportunities across the Ku- and Ka-band leveraging its newly acquired assets.

Scatteia: As with all major deals within the satcom market, the hidden ‘star’ is almost always the spectrum. The overall assessment seems to be that there will be a lot more consolidation in the coming years, and this will come about as more and more LEO operators begin operations, right now there are just two prominent LEO operators.

Sreekumar: The main impetus behind consolidation lies in the need to effectively compete in segments expected to remain multi-orbit driven. By combining complementary capabilities and scaling up operations, there’s an opportunity to competitively price and efficiently deliver on-demand solutions. This strategic merger also strengthens the case for expanding government market share. This may not be the final major consolidation event of the year.

Palerm: This is a major deal for the industry given the market share in the traditional GEO space of the combined entity. The industry has been slow in catching up with the pace of innovation of Starlink. We hope the combined entity has the scale, resources, and commitment to drive innovation across the industry.