Wave of consolidation pushes rivals SES and Intelsat into merger talks

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TAMPA, Fla. — SES and Intelsat are in active merger talks as a wave of consolidation sweeps through the satellite industry, the Financial Times reported on Aug. 4.

Satellite fleet operators are discussing the structure of a potential combination to improve competition with SpaceX’s Starlink broadband constellation, the report saidciting sources who stressed there is no guarantee a deal will be reached.

Merged group would generate $4 billion in revenue and follow Eutelsat and OneWeb plans announced last week to consolidate their businesses.

Viasat is also close to completion its $7.3 billion plan to acquire Inmarsat this year following regulatory approvals.

Intelsat and SES won’t say whether they’re considering a merger, but both companies have acknowledged paying close attention to industry consolidation.

“We do not comment on rumors and speculation,” Intelsat spokesman Clay McConnell said.

“Nevertheless, it is clear that our industry is transforming, with new capabilities and technologies coming to market. Intelsat is focused on being a leader in this transformation. »

He said “partnerships between satellite communications companies and bringing complementary capabilities together can boost competition” in the connectivity market.

SES CEO Steve Collar made similar comments when asked about the trades reported during the company’s August 4 financial results for the second half of 2022.

Mr. Collar said, in general, “consolidation in the satellite industry is a good thing” which will help streamline the market.

“Of course, from SES’s perspective, we will only do things in the best interest of our shareholders, and we will leave it at that,” he added.

Shares of the Luxembourg-based company fell 10% following the Financial Times report, despite reporting financial results that beat analysts’ expectations.

SES generated 899 million euros ($916 million) in revenue for the first six months of 2022, down 2.1% compared to the same period last year after adjusting for exchange rates.

The decline was driven by a 7% year-on-year decline in underlying video revenue to €501 million.

Video continues to provide the bulk of the operator’s revenue, although its connectivity-focused networking business has caught up in recent years.

Underlying revenue from SES’ networks business increased by 2.1% to €387 million.

Public revenue fell 7.5% to 146 million euros for the six months to the end of June.

HSE announced August 1 that it had completed its acquisition of DRS Global Enterprise Solutions, a provider of satcom services to the US government, in a deal that would double its government business.

Group adjusted EBITDA, or earnings before interest, tax, depreciation and amortization, fell 3.8% to 545 million euros.

SES also announced a further delay for its O3b mPower constellation, the operator’s next-generation constellation in medium Earth orbit.

The operator had planned to deploy six of the 11 Boeing-built O3b mPower satellites on three SpaceX launches between July and September.

However, these satellites are now expected to be launched between October and December.

Collar said SES is going to have to “be a bit more patient than we’d like, but the good news is that we’re fully locked in for three launches this year and have a solid go-live date for [the second quarter of 2023]adding that the delay does not alter its growth trajectory.

As for Intelsat, the American company emerged from bankruptcy in February after a restructuring agreement that reduced its debt from $16 billion to $7 billion.

The operator appointed David Wajsgras as CEO in April, who was form a new management team to guide a growth strategy focused on connectivity with this reduced debt.

Intelsat and SES are also vying for nearly $9 billion in combined revenue for clearing C-band spectrum for terrestrial cellular operators.

Notably, they were also locked up a long legal battle on how these profits should be divided between them.

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