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The UK’s Competition and Markets Authority (CMA) fears the proposed $7.3 billion merger between Viasat and Inmarsat could lead to higher prices for poorer quality in-flight Wi-Fi.
The first findings of a study (opens in new tab) by the watchdog concluded that the deal would combine the two largest suppliers in a market with few other alternatives.
While several companies, including Starlink and OneWeb, are targeting the aviation market with their low-Earth orbit (LEO) satellite technology, it will take some time for these companies to become major players.
Satellite connection
Given the difficulty of switching providers once the equipment is installed, the CMA fears the merged company could effectively capture a large chunk of the market before a potential challenger could compete.
“This is an evolving market, but the merging companies are currently 2 of the main players – and it remains uncertain whether the next generation of satellite operators will be able to compete effectively against them,” said Colin Raftery, senior director at the CMA .
“Ultimately, airlines could face a worse deal because of this merger, which could have a knock-on effect for UK consumers as in-flight connectivity becomes more widespread.”
Both parties now have five business days to submit proposals that address the CMA’s concerns, after which the CMA has an equal amount of time to accept each offer or refer the case for a ‘Phase 2’ investigation.
The chief executives of both companies have denied that the merger would be anti-competitive and said they hope Phase 2 will see the deal go through.
“There is great interest in ubiquitous, high-quality, affordable [in-flight Wi-Fi], so the CMA’s decision to proceed to a Phase 2 assessment is not unexpected,” said Mark Dankberg, CEO of Viasat. “We plan to work closely with the CMA to demonstrate that our transaction will benefit customers by improving efficiencies, reducing costs and increasing IFC availability around the world – and to phase 2 to reach a satisfactory conclusion.”
“There is no lack of competition in satellite connectivity for the airline industry,” added Rajeev Suri, CEO of Inmarsat. “Strong players are already offering in-flight connectivity, and the new LEO players — already exploiting more than half of the globally available satellite broadband capacity — are aggressively and successfully targeting aviation. We expect competition to be strong in the coming years and that together Viasat and Inmarsat will be well placed to invest in the technologies needed to meet the growing needs of aviation customers and to compete with the LEOs and others.”
Inmarsat and Viasat first announced plans to merge last November and hoped the transaction would close by mid-year. Another UK-based satellite company, OneWeb, is also in the process of merging with a foreign-based company, Eutelsat.