Intense competition from the likes of Elon Musk’s Starlink, Amazon’s Project Kuiper, new entrants and merging legacy players has seemingly prompted US satellite giant SES to make a major move, this week agreeing a $3.1 billion deal to acquire European rival Intelsat.

The deal adds to two other stand-out satellite mergers completed in recent times, with Viasat buying Inmarsat for $7.3 billion and Eutelsat combining operations with OneWeb.

Dubbed as a “compelling transaction focused on the future”, the SES and Intelsat agreement was arguably a year in the making after discussions about the tie-up broke down in June 2023.

In finally getting there, Mike Thompson, practice director for Space & Policy at Access Partnership, told Mobile World Live the timing of the deal seems closely related to the appointment of new SES CEO Adel Al-Saleh, who took over in February this year.

Thompson, a satellite industry observer for more than 30 years, suggests Al-Saleh was able to do what his predecessor Steve Collar was not, convincing SES’ board to pay the price required to buy out its largest competitor, “in order to survive”.

The new man in charge has “clearly grasped the nettle” in the face of competition from a now-established Starlink, an Amazon play that is nearing launch and a combined Eutelsat/OneWeb entity, according to Thompson, all of which are threatening to make the geostationary satellite (GSO) industry “very lonely”.

Arjun Sreekumar, consulting director, Aerospace and Defense at Frost added SES has strategically timed the acquisition with proceeds it secured from C-band spectrum, “deliberately using the resources to strengthen the company’s market position”.

As Thompson points out, GSO satellites, which provide vital infrastructure to the global communications ecosystems and have ruled the industry for more than 50 years, are under threat by the successful deployment of large constellations of smaller satellites – so-called “megaLEOs” promising greater capacities and lower bandwidth costs.

He further argues that while competition is one factor for consolidation, the fact that players like Starlink and Oneweb have completed deployment of such mega constellations, with Amazon not far behind, means the fear of upending the existing GSO industry may be a bigger driver.

“The new entrants have successfully deployed these constellations and must now develop their commercial positions to capitalise on them,” he said. “SES and Intelsat still carry the largest share of the world’s satellite traffic today, and the battle will be fought over who services this traffic in five years’ time.”

Christof Kern, business development lead – Satellite and Space at consultancy TTP, told MWL Musk for one has to a certain extent “put pressure on traditional operators in some market segments”, but added most of Starlink’s growth is driven by addressing new consumer satellite broadband users”.

According to Sreekumar, increasing competition in the space segment is clearly prompting satellite operators to consider mergers and acquisitions as a “strategic response”, while concurring with Thompson that the rapid deployment of new constellations is disrupting the traditional model.

“Traditional players are merging to combine their technological capabilities, infrastructure, and customer bases to strengthen their offerings,” he told MWL.

Superior satellite
Kern was keen to point to the power and presence traditional satellite operators do hold, which ultimately increases through consolidation, stating the SES, Intelsat deal marks “a significant milestone in the industry”.

“The combined company is poised to be the world’s largest satellite company in terms of revenue and could dominate the market, leveraging its extensive resources and expertise to shape the future of satellite communications and deliver on new use cases,” he said.

Kern also pointed to the duo’s pledge to maximise investment in both GSO and Medium Earth Orbit (MEO) satellites, in addition to the potential of deploying Low Earth Orbit (LEO), directly taking on Starlink et al.

“With confidence in the competitiveness of these satellites, when compared to Starlink’s LEO constellation, the combined entity will be able to offer a wider coverage of the Earth’s surface at a more affordable cost, albeit at higher latency.”

Kern however doubts Starlink, with the might of Musk behind it, will be too concerned with what players like SES and Intelsat are up to.

“Musk’s clear goal is to book as many Starlink launches as possible to drive the valuation of SpaceX. Whether Starlink will actually be profitable is secondary.”

Regulatory concerns?
SES expects the deal to complete at some point in the second half of 2025, but with merger activity ramping up in the sector, is there any chance regulators could block the transaction or could we even see lobbying from rival players opposing the deal?

Thompson believes regulators will pay “keen attention”, but their likely focus will be on consumer competition and cost. In this sense, they may “encourage new entrants in order to see greater capacities brought to market”.

He also points to the fact that Starlink is already licensed in several European countries, offering a service direct to the consumer at an attractive price point.

In the satellite industry, he added there may be some concerns that tie-ups such as the SES deal could harm competition, because of the possibility “to bypass national telecom infrastructure or the impact on national security”, meaning they “may resist them”.

Sreekumar equally does not expect a “hunky-dory” regulatory ride for the SES deal, but said antitrust action against mergers such as this one are mainly based on the “merged entity’s ability to command a large enough market share to exert undue influence”.

By looking at the pair’s current service portfolio to the US government, they have a combined business that runs in the range of $700 million to $800 million.

“This is but a small share of the US space budget that runs into several billions – so prima facie it does not look very anti-competitive,” he said.

In terms of opposition from rivals, Kern doubts there will be much of a public outcry from new entrants, over fears it could be seen as a sign of weakness.

“However, they might lobby against it in the background. After all, the combined SES, Intelsat EBITDA could generate enough cash to launch a LEO constellation every 2-3 years.”

One thing is for sure, Musk’s Starlink alone has clearly ruffled feathers in the satellite industry. And as Kern suggested, the billionaire’s goal for the business doesn’t even appear to be centred on making a profit – making him a very dangerous threat.