UK’s competition authority concerned by proposed Viasat acquisition of Inmarsat

Author: EIS Release Date: Oct 19, 2022

Viasat’s proposed takeover of Inmarsat has hit its first regulatory setback with an objection by the UK’s Competition and Markets Authority (CMA).

 

UK's competition authority concerned by proposed Viasat acquisition of Inmarsat

 

Concerns raised in an initial objection revolve around the provision of inflight connectivity (IFC) for airline passengers. Specifically, that the deal could lead to airlines facing higher prices and worse quality on-board wi-fi and it would remove a key competitor from the market. It identifies IFC as a ‘must-have’ service for airlines and customers wishing to stay connected during flights.

 

Another point raised by authority, in their Phase 1 response, was first mover advantage. They highlighted that it’s difficult for airlines to switch providers once they have installed a particular IFC system. They expressed concern that the new Viasat could effectively lock in a large part of the customer base before the likes of OneWeb and SpaceX become more credible options.

 

Panasonic, Intelsat and Anuvu are among existing competitors, but the CFA writes:

 

“Of the other IFC providers, the evidence shows that: Panasonic, which was the firstmover in IFC and still has a high share of supply, is in decline, due to its reliance on capacity from third-party SNOs and airlines’ perception that it is expensive and offers old technology; Anuvu competes only for short-haul flights and is considered a weak option by airlines; and Intelsat occupies a modest position in the market and it is uncertain how it will develop in the future.”

 

The American company’s acquisition had been given the go ahead – on the basis of posing no threat to national security – by the Secretary of State for Business, Energy and Industrial Strategy (BEIS), Jacob Rees-Mogg.

 

Viasat is planning to build a global, hybrid space and terrestrial network, providing broadband and IoT services.

 

“This is an evolving market, but the merging companies are currently two of the key players – and it remains uncertain whether the next generation of satellite operators will be able to compete against them effectively,” said Colin Raftery, CMA Senior Director.

 

“Ultimately, airlines could be faced with a worse deal because of this merger, which could have knock-on effects for UK consumers as in-flight connectivity becomes more widespread.”

 

The companies have until tomorrow, 13 October, to allay the Phase 1 concerns of the regulator or else the process will move into a more detailed and lengthy Phase 2 consideration.

 

You can view the Viasat / Inmarsat merger inquiry page on the Competition and Markets Authority website for updates.

 

Note that the U.S. Federal Communications Commission and Justice Department has also yet to officially approve the combination.

 

Under the terms of the $7.3 billion deal, Viasat had given “economic undertakings” to the BEIS, including an expansion in the number of high skilled jobs in key areas, a 30% increase in overall R&D spending in the UK, and the international business headquarters being situated in the UK.

 

The likes of OneWeb, SpaceX’s Starlink and Amazon’s Project Kuiper will potentially provide future competition in this area, and also around satellite-based IoT, 5G and mobile broadband offerings.