The U.K.’s Competition and Markets Authority (CMA) is concerned that Viasat’s proposed acquisition of Inmarsat will lead to substantially less competition in the in-flight Wi-Fi services market.
The two companies agreed to merge in a $7.3 billion deal announced in November 2021.
In a statement, the CMA said the deal could lead to airlines facing higher prices and worse quality for on-board Wi-Fi and that the deal would remove a key competitor from the market.
The CMA also noted that it has found demand for in-flight connectivity is growing and many airlines consider it a must-have to meet passengers’ desire to stay connected during flights. The CMA said it focused its investigation on the services most likely to impact U.K. consumers, namely in-flight services supplied to commercial airlines flying from/to and within Europe.
Satellite operators like SpaceX, OneWeb and Telesat are taking steps to supply in-flight services, and SpaceX has a contract with Hawaiian Airlines. But those services still face operational and technical barriers before they’re offered on board aircraft and there are regulatory hurdles that can’t be overcome through financing alone, the competition authority said.
The companies have five working days to submit proposals to address the CMA’s competition concerns. The CMA then has another five working days to consider whether to accept any offer instead of referring the case for an in-depth Phase 2 investigation.
Companies confident in benefits
California-based Viasat and London-based Inmarsat said they remain committed to working with the CMA to demonstrate how their planned tie-up will benefit airlines, passengers and enterprise users of in-flight connectivity (IFC) services.
"There is great interest in ubiquitous, high-performance, affordable IFC, so the CMA's decision to proceed to a Phase 2 review is not unexpected, even though IFC represents less than 10% of the revenues of the combined company," said Viasat CEO Mark Dankberg in a statement.
"This is still a nascent, dynamic, and rapidly evolving business," he said. "We intend to work closely with the CMA to show that our transaction will benefit customers by improving efficiencies, lowering costs, and increasing IFC availability around the world—and to reach a satisfactory conclusion in Phase 2."
Inmarsat CEO Rajeev Suri said there’s no lack of competition in satellite connectivity for the aviation sector and they expect competition to be robust in the years ahead.
"In addition, the highly complementary combination of Viasat and Inmarsat will support the UK Government's objective to drive growth by providing more jobs and investment in the UK space industry than we expect could be provided by Inmarsat as a standalone satellite communications provider," Suri added in a statement.
The companies pointed out that their proposed transaction already has secured the U.K. government's clearance under the National Security and Investment Act and over the summer from the Committee on Foreign Investment in the United States.
However, they still need the approval of the U.S. FCC and Department of Justice, as well as the European Commission.