The Competition and Markets Authority is looking into Viasat’s buyout of Inmarsat amid worries that it will make it more difficult for competitors such as Elon Musk’s SpaceX and the United Kingdom’s OneWeb to target the aviation sector.
The CMA is particularly concerned that the agreement may result in increased fees for onboard Wi-Fi on airline journeys.
“We are sure that the deal will improve the availability of more inexpensive, quicker, and more reliable IFC [in-flight connectivity] internationally to operators, airlines, and passengers,” stated Viasat and Inmarsat.
The UK’s competition watchdog has begun an investigation into American satellite internet operator Viasat’s $7.3 billion acquisition of British rival Inmarsat.
The Competition and Markets Authority submitted the transaction for a “Phase 2” competition inquiry on Friday, concerned that it would make it more difficult for competitors such as Elon Musk’s SpaceX, UK business OneWeb, and Canadian operator Telesat.
To conduct business with the aviation industry
The CMA is particularly concerned that the agreement may result in increased fees for onboard Wi-Fi on airline journeys.
According to the watchdog, Viasat and Inmarsat “compete closely in the aviation sector, notably for the provision of onboard wifi for passenger usage.” While just a few companies presently provide in-flight connection (IFC) services, the CMA predicts that the sector “will develop dramatically in the next years.”
Such a move “may result in higher rates and lesser quality connectivity options, eventually compromising the cost, quality, and availability of services for airline customers,” according to the statement.
According to the regulation, switching satellite providers may be extremely difficult for airlines once network equipment has been deployed. As a result, the Viasat-Inmarsat combination might “lock up a major portion of the client base” before other suppliers arise.
According to the FCC, Intelsat and competitor Panasonic account for more than 75% of the long-haul IFC market.
“This is a changing industry, but the merging businesses are now two of the important players – and it is unclear whether the next generation of satellite operators will be able to compete successfully against them,” said Colin Raftery, senior director of the CMA.
Ultimately, airlines may face a poorer deal as a result of this merger, which may have repercussions for UK consumers if in-flight connectivity becomes more ubiquitous.”
Viasat and Inmarsat said in a statement Friday that they are “sure that the deal will improve the availability of more economical, quicker, and more reliable IFC [in-flight connectivity] internationally to operators, airlines, and passengers.”
According to the firms, they would “actively cooperate” in the CMA’s inquiry and “consider and convey any modified expectations for the deal closure as interaction with the CMA proceeds.
According to Viasat CEO and Executive Chairman Mark Dankberg, the transaction would boost the availability of in-flight connectivity services internationally. “Industry analysts believe that the entry of new, lavishly financed LEO rivals will make an already highly competitive IFC market more more competitive,” he continued.
According to Rajeev Suri, CEO of Inmarsat, the company “faces strong competition every day in delivering in-flight connectivity.”
Given the power of well-funded new enterprises entering the industry, there is reason to expect that intensity to increase.” In the face of shifting market dynamics, the UK stands to benefit greatly from the establishment of a strong satellite communications corporation, which is positioned to expand the country’s position in the crucial space industry while supporting national defence and creating employment and investment.
From Elon Musk’s SpaceX to Amazon, which owns the Kuiper satellite constellation, firms are racing to launch satellites into orbit to beam internet to people in remote and hard-to-reach locations. It has become a priority for the United Kingdom government, which has invested in domestic satellite provider OneWeb.
However, it is difficult for businesses to flourish in the market since it demands a large amount of cash and people. After running through billions of dollars in investors, including Japan’s SoftBank, OneWeb declared bankruptcy in 2020.
Later that year, the firm was rescued with the assistance of the United Kingdom government, which contributed $500 million as part of a bailout package.
Britain and the European Union have also been more militant in defending their “digital sovereignty” – the notion that countries should not lose control of critical technology like semiconductors, artificial intelligence, and cloud computing. A measure known as the National Security and Investment Act in the United Kingdom permits governments to intervene in foreign takeovers if they believe there is a national security danger.
Nvidia, an American chipmaker,
The government’s national security investigation and a federal lawsuit from the FCC thwarted an effort to take up UK chip firm Arm. Meanwhile, a U.K. security investigation is underway on the sale of Welsh semiconductor business Newport Wafer Fab to a Chinese-owned company.
In the case of Viasat and Inmarsat, the acquisition has already been authorised on national security grounds in the United Kingdom and the United States.
