- Deal could lead to airlines facing higher prices and worse
quality on-board wifi
- Deal would remove key competitor from market
Viasat and Inmarsat are 2 of the largest satellite communications
companies in the world, supplying businesses globally with mobile
connectivity that enables services such as internet, email, and
video calling. The 2 businesses agreed to merge in a $7.3 billion
deal announced in November 2021.
Demand for satellite connectivity is increasing rapidly, driven
in large part by the ever-growing use of the internet by
businesses and consumers, including through the increased use of
data-intensive applications. Both companies are in the process of
substantially expanding their offerings, sending more satellites
into space and competing aggressively for new business
opportunities. Other players, including Starlink (operated by
SpaceX), OneWeb, and Telesat, are also entering the sector with a
new generation of satellites.
The investigation by the Competition and Markets Authority (CMA)
found that Viasat and Inmarsat compete closely in the aviation
sector, particularly for the supply of onboard wifi for passenger
use. While only some airlines currently offer in-flight
connectivity, the availability of these services is expected to
grow significantly in coming years.
The deal brings together 2 of the strongest suppliers in a market
with few other established players. Although new players, such as
Starlink, OneWeb, and Telesat, are seeking to target the aviation
sector, this is one of the most difficult industries for
satellite operators to enter, and the CMA’s initial investigation
has found that there is significant uncertainty about when – if
at all – these suppliers would be in a position to compete
effectively with Viasat and Inmarsat.
The CMA’s investigation also found that it can be very difficult
for airlines to switch providers once they have installed a
connectivity solution. The CMA is therefore concerned that the
merged company could effectively lock in a large part of the
customer base before emerging suppliers are able to compete.
The CMA is concerned that the loss of competition brought about
by the deal could have an adverse impact on UK businesses and
consumers: airlines could face higher prices and be offered lower
quality connectivity solutions, ultimately affecting the cost,
quality and availability of services for airline passengers.
Colin Raftery, CMA Senior Director, said:
This is an evolving market, but the merging companies are
currently 2 of the key players – and it remains uncertain whether
the next generation of satellite operators will be able to
compete against them effectively.
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 firms now have 5 working days to submit proposals to address
the CMA’s competition concerns. The CMA then has a further 5
working days to consider whether to accept any offer instead of
referring the case for an in-depth Phase 2 investigation.
For more information, visit the Viasat / Inmarsat merger
inquiry page.
Notes to editors:
- For media enquiries, contact the CMA press office on 020 3738
6460 or press@cma.gov.uk.
- The Secretary of State for Business, Energy and Industrial
Strategy carried out a separate investigation and made a
final order pursuant
to section 26 of the National Security and Investment Act 2021
to provide assurance that (i) controls are in place to protect
information from unauthorised access and (ii) strategic
capabilities continue to be provided by Inmarsat and Viasat to
the UK government.
- Under the Enterprise Act 2002, the CMA has a duty to make a
reference to Phase 2 if the CMA believes that it is or may be the
case that a relevant merger situation has been created, or
arrangements are in progress or contemplation which, if carried
into effect, will result in the creation of a relevant merger
situation; and the creation of that situation has resulted, or
may be expected to result, in a substantial lessening of
competition within any markets or market in the United Kingdom
for goods or services.
- Viasat owns and operates a network of geo-stationary
satellites and provides satellite connectivity services for use
in consumer, commercial, and government applications. Viasat also
provides communications and cybersecurity products and services,
and manufactures and supplies equipment and network technology
for satellite connectivity services.
- Inmarsat owns and operates a network of geo-stationary
satellites and provides broadband and narrowband connectivity
services for government and commercial applications.
- Viasat entered into a share purchase agreement with
Inmarsat’s shareholders on 8 November 2021 pursuant to which
Viasat agreed to indirectly acquire 100% of Inmarsat’s issued
share capital.
- The CMA believes that the merger gives rise to a realistic
prospect of a substantial lessening of competition in the supply
of in-flight connectivity services to: (a) commercial aviation
customers; and (b) business aviation customers.
