Viasat’s Inmarsat deal risks making in-flight WiFi more expensive, says CMA

The UK competition regulator has said California-based satellite operator Viasat’s $7.3bn takeover of Britain’s Inmarsat could lead to airlines facing more expensive and worse quality on-board WiFi, in a finding that is set to substantially delay the closure of the deal.

In an update on Thursday the Competition and Markets Authority said it planned to open an in-depth investigation into the tie-up, which would create one of the world’s biggest space-based broadband providers.

Viasat and Inmarsat compete closely in the aviation sector and particularly in the growing area of supplying on-board WiFi for passenger use. The regulator said airlines could be forced to pay more for WiFi as a result and be offered “lower quality connectivity solutions”, “ultimately affecting the cost, quality and availability of services for airline passengers.”

CMA senior director Colin Raftery said: “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.”

Viasat and Inmarsat now have five working days to offer a solution to allay the regulator’s concerns, which the CMA then has five days to respond to. Otherwise the deal will face an in-depth probe which can take several months and would push the timeframe for its closure well into next year.

It is not yet clear if Viasat and Inmarsat will put forward any remedies.

They counter that they must build scale in order to compete with deep-pocketed US challengers.

“The CMA’s decision to proceed to a Phase 2 review is not unexpected, even though [in-flight communication] represents less than 10 per cent of the revenues of the combined company,” said Mark Dankberg, chief executive and chair of Viasat.

“We intend to work closely with the CMA to show that our transaction will benefit customers by improving efficiencies, lowering costs, and increasing [in-flight connectivity] availability around the world.” 

Viasat announced the takeover in November, a tie-up that combined two of the largest geostationary satellite operators globally. The merger between the two satellite groups was the first in a flurry of deal discussions across the industry, as some of the older and more traditional groups look to gain scale and fortify themselves against cash-rich challengers like Elon Musk’s SpaceX and Amazon’s Kuiper.

SpaceX and Kuiper have shaken up the industry, attracting huge attention by betting big on cheaper and smaller satellites that operate from low-earth orbit. Older companies are now more eager than ever to gain scale and adopt a multi-orbit strategy that spans different altitudes.

In July, French satellite operator Eutelsat announced its intention to acquire smaller UK rival OneWeb, and Luxembourg-based satellite operator SES has been in talks with US group Intelsat about a potential combination, according to people familiar with the discussions.

The CMA found that although new entrants like Starlink, OneWeb and Telesat were trying to target the aviation sector, it was one of the most difficult industries for satellite groups to enter. It was also difficult for airlines to switch internet providers, the CMA said, meaning the merged group might be able to “lock in” a large part of the customer base.

“There is no lack of competition in satellite connectivity for the aviation sector,” said Rajeev Suri, chief executive of Inmarsat. “Strong players are already offering in-flight connectivity and the new low-earth orbit players . . . are aggressively and successfully targeting aviation.”