European satellite operator, SES, has announced its plans to acquire the U.S. satellite operator and service provider, Intelsat, in a $3.1bn takeover. The move comes after provisional discussions over a merger ended in the summer of 2023. In this article, Valour Consultancy examines what this means in the context of major mobility verticals.
Commercial Aviation
The synergies in commercial aviation are extensive with SES historically operating in the background and Intelsat having direct access to airlines. Intelsat’s aviation service relies on Ku-band satellite connectivity, and to a lesser extent, Gogo’s air-to-ground (ATG) network in North America. The company serves around 3,000 commercial aircraft according to our latest quarterly tracker data, making it the second largest provider of in-flight connectivity (IFC) in the market by share of installed base. The majority of aircraft operating on its network are based in North America with SkyWest, Delta, and Alaska Airlines among its largest customers.
Through this deal, SES takes centre stage, moving downstream and into a familiar service provision role it has experience with in both the cruise and government / defence sectors. The working assumption is that SES will look to avoid disrupting the status quo for Intelsat’s customer base and add redundancy through its own GEO-based Ku-band service.
The deal also generates optionality for SES. Not only will the vendor be able to compete for customers with Ku- or Ka-band services, it is also expected to benefit from improved multi-orbit capabilities thanks to Intelsat’s partnership with Eutelsat OneWeb. This, alongside SES’s O3b MEO (Ka-band) network, gives SES an extensive multi-orbit, multi-band play – arguably creating the most diverse, flexible offering on the market.
Longer-term, there’ll be added impetus for SES to source truly agnostic hardware which allows carriers to benefit from the entire portfolio of LEO, MEO, and GEO services, across Ku– and Ka- frequencies. This is something many in the industry have been pushing for, but the fragmented nature of the market has meant the incentives are not always there to prioritise such work.
Business Aviation
The acquisition is interesting from a business aviation standpoint. Neither SES, nor Intelsat have made huge strides in the market with their respective GEO Ku-band solutions, LuxStream and FlexExec. Both companies have sought to gain market share in the lucrative large cabin jet segment where Viasat is dominant. However, we estimate that, combined, there are somewhere in the region of 200 aircraft using one of these solutions today. This pales into comparison with Jet ConneX (JX), which has been installed on more than 1,500 business jets globally. Combining their satellite footprints and similarly flexible service plans will allow the new entity to present a more attractive alternative, especially in the aftermarket where there is a bountiful supply of older jets that are ripe for comparatively lower cost connectivity upgrades.
It remains to be seen how SES will address the market going forward. Right now, LuxStream is sold via Collins Aerospace, while FlexExec is the master distributor for FlexExec. While Viasat still favours using Value-Added Resellers (VARs) for JX in business aviation, 2021 saw the company launch a direct service model called Viasat Select. With Starlink also winning business by cutting out the middleman, SES could be inclined to follow suit – much as it has with Airbus where it is a managed service provider (MSP) for the Airbus HBC+ programme.
What is certain, however, is that SES will bring a compelling multi-orbit strategy to the table in a market that has long-craved multiple high-capacity redundant paths off the aircraft and where, as a result, dual provisioning is common. The two companies’ GEO coverage combined with O3b MEO capacity is matched only by Eutelsat OneWeb (which can present a unified GEO/LEO offering) and could find favour amongst the VIP crowd. Here, governments, heads of state and corporate flight departments require the utmost in resilience and have the greatest need for the low latency performance offered by NGSO satellites.
Maritime
The deal will combine SES’s Skala and O3b service, with Intelsat’s FlexMaritime. Together, the new company will have more than 15,000 vessels operating on its network, globally. A sizable and varied customer base which penetrates multiple verticals within the maritime market. FlexMaritime makes up the majority of that customer base, with around 14,000 vessels served. SES has recently finished a “clean-up” of its customer base, by eliminating a number of low-value contracts.
So, that’s the current state of play, but what does this deal mean for the future? The new entity will be a major player in maritime connectivity, of that there’s no doubt. However, it will be operating in a highly competitive market, and one which appears to be very open to LEO solutions. Starlink has already had a huge impact,, more so than it has done in aviation, and this doesn’t look like slowing anytime soon. It’s something SES/Intelsat will have to contend with if it wants to grow or even maintain market share.
Conclusion
This is the third major instance of M&A activity involving satellite operators in the last couple of years. 2023 saw Viasat acquire the UK’s Inmarsat, and European satellite operator, Eutelsat, merge with British LEO network operator, OneWeb . While consolidation in the market was always expected, it has been assured by the emergence and impact of Starlink, the LEO network operated by Elon Musk’s SpaceX – especially in the mobility segment. This, combined with the looming spectre of Amazon Kuiper on the horizon, has propelled long-time industry players into decisive action in order to protect their market position.
The question everyone has been asking is whether this deal improves SES’ positioning against Starlink and Amazon? In the context of mobility, the optionality SES will have at its disposal certainly means it has the forward plan and flexibility to adapt to a fast-evolving market. There could also now be the justification for SES to build an in-house LEO constellation sometime in the future to really commit to a head-to-head. This would become even more likely were Viasat to go ahead with a rival NGSO network – either by developing one itself, or by partnering with a fellow Ka-band stablemate like Telesat Lightspeed.
But it’s difficult to see this acquisition slowing the momentum Starlink has built in markets that are ripe for LEO. Its disruptive presence in mobility has thus far been most keenly felt in the maritime space but there is simply a massive amount of excitement in both business and commercial aviation that is just not going to go away, despite the scepticism of some industry observers. Indeed, the number of committed tails in aviation already sits at around the 500 mark and with OEM line fit agreements reportedly looming, a four-figure number is not far away.
In our view, this is a move which instead, consolidates SES’ strong positioning in premium markets, such as commercial aviation and government / defence.
One might say that the proverbial city walls have been strengthened and the ramparts reinforced as we await the next battle in what is sure to be a sustained conflict.