Intelsat and SES merger to create $10B satellite giant is off
Hear that, Amazon Kuiper and Starlink? The coast is clear... Unlike the skies. Ahem
Satellite teleco operators Intelsat and SES have ended talks over a proposed merger of the two businesses that could have resulted in a company with a market valuation of more than $10 billion.
SES announced in a short notice posted to its website that discussions with Intelsat over a potential pairing up have ceased. The merger was originally slated as a move that would help the combined company to better compete against new entrants in the satellite market, such as Starlink.
"The breakdown of merger talks is a major blow to both parties. Established satellite players such as Intelsat and SES are facing fresh competition from Elon Musk’s Starlink venture and Amazon’s Project Kuiper," Kester Mann of CCS Insight told The Register.
"By far the biggest barrier to success in satellite broadband is cost. This includes not just the huge upfront investment to launch satellites into orbit, but also their heavy maintenance and replacement costs. Mergers offer the opportunity to gain scale and share the financial burden. It will be interesting now to see if either seeks alternative partnerships with other providers."
It was SES that also confirmed back in March that the two companies were engaged in talks, posting that: "In response to rumors in the market, SES S.A. confirms that the company has engaged in discussions regarding a possible combination with Intelsat,” but cautioning at the time that “there can be no certainty that a transaction would materialize."
In response to the latest news, an SES spokesperson told us that: "It has become clear that a path to an agreement which would be acceptable to both parties cannot be found, and so SES and Intelsat have ceased discussions. We will not discuss any details of the negotiations."
Intelsat declined to even confirm that talks had been taking place, with a spokesperson for that company saying "Intelsat engages in strategic conversations with potential partners on a regular basis, and we do not publicly comment on the content or outcome of those discussions."
But the spokesperson added: "I would highlight, though, that the Intelsat team has orchestrated a remarkable business turnaround over the past year-plus, and we are well positioned as a market and strategy leader in the satellite communications industry."
The company emerged from a lengthy Chapter 11 financial restructuring process last year as a private company with a new Board of Directors, and its debt cut from approximately $16 billion to $7 billion and with $6.7 billion in new financing supported by new equity owners.
SES reported earnings of €265 million ($290 million), down 3.2 percent year-on-year, on revenue of €490 million ($537 million) for its Q1 2023.
According to Bloomberg, Intelsat was unable to come to an agreement with SES and its major stakeholders on the future direction of the combined business, citing unnamed sources said to be familiar with the matter. If the transaction had gone ahead it could have valued the combined business at more than $10 billion, it claimed.
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Intelsat and SES have been facing increased competition from the likes of SpaceX's Starlink as well as Amazon with its planned Project Kuiper, both of which use large numbers of relatively short-lived satellites in low Earth orbit, and aim to provide low-cost internet access.
Last year, Eutelsat and Oneweb announced a merger that would see Eutelsat take ownership of OneWeb and combine its fleet of satellites in geosynchronous equatorial orbits (GEO) with OneWeb’s constellation of low Earth orbit satellites, allowing it to offer a mix of services that take advantage of the different capabilities of each. The merger was scheduled to be complete by the middle of this year. ®