UK satellite telecommunications provider Inmarsat is set to become the latest high-value British tech company to fall into foreign ownership, having agreed a takeover worth $7.3bn with US rival Viasat. Although the space industry’s recent focus has been low-earth orbit satellites, geostationary satellites such as those provided by Inmarsat are set to remain vital to the work of many businesses. Despite this strategic importance, the UK government is unlikely to block the sale, experts say.
The deal for Inmarsat, announced late on Monday, would see Viasat pay $850m in cash and $3.1bn in shares for its London-based rival, while assuming $3.4bn worth of debt. The US company already provides satellite-enabled communications and connectivity services to customers in the shipping, aviation and defence sectors. Acquiring Inmarsat will enable it to extend its global reach.
“This is a transformative combination that advances our common ambitions to connect the world,” said Viasat’s executive chairman Mark Dankberg, announcing the planned acquisition. “The unique fusion of teams, technologies and resources provides the ingredients and scale needed for profitable growth through the creation and delivery of innovative broadband and IoT services in new and existing fast-growing segments and geographies,”
What is Inmarsat and what is Viasat getting for its $7.3bn?
Founded in 1979, Inmarsat has established itself as one of the most innovative satellite companies in the world. It was taken private in 2018 when it was brought for $3.4bn by a consortium of private equity and pension funds, which now plan to sell it on to Viasat. The company is perhaps best known for developing the ADS-B tracking system, which was used in the hunt for the missing Malaysia Airlines flight MH370 in 2014.
Dr Malcolm Macdonald, director of the Scottish Centre of Excellence in Satellite Applications, says the acquisition will bolster the combined company. "It is fair to say that Inmarsat are a globally leading company, and have a long track record of being successful," he says. "From a technical and business perspective, I can see the clear value and logic of this merger."
Inmarsat made its name building geostationary satellites, which sit at an altitude of 36,000km above the earth and move at the same speed as the planet. Though these satellites are expensive to build and launch, they provide a reliable communications signal, and Marek Ziebart, professor of space geodesy at University College London, says the UK has been a pioneer in this area thanks largely to Inmarsat.
"It is a fantastic company and a real prize asset to the UK," he says. "Twenty-five per cent of the world's geostationary satellites are built in the UK, and we have a large part of the market for the innovation and development of services in space. Inmarsat is not just a service provider, it has been an innovator in developing new services, particularly for maritime and aviation. It's a real blue-chip asset."
Inmarsat Viasat deal: will it happen?
If the takeover is completed, Inmarsat will become the latest in a string of British technology companies to be purchased by rivals from abroad. The most high-profile example is chip designer Arm, which was sold to Japanese company SoftBank in 2016 for £24bn and is now subject of a bid from US-based Nvidia. Earlier this year Britain's largest chip plant, the Newport Wafer Fab, was purchased by a Chinese-owned company, Nexperia.
Britain's post-Brexit industrial strategy is focused on becoming a world leader in science and technology, but despite this, Professor Ziebart does not expect the government to step in and block the deal. "The government is happy to apply free-market economics and let the market sort everything out," he says. "Unfortunately what tends to happen is that the market then strips out these national assets. From a UK perspective, do we really want to lose control of something that has become such a rock-solid part of global communications?"
The government's competitions and markets authority is investigating the Arm-Nvidia deal, while Sir Stephen Lovegrove, the national security adviser, has been instructed to look at the Newport Wafer Fab take-over. No action has yet been announced on the Inmarsat deal, though a government spokesman told The Guardian it was "closely monitoring" the situation.
Macdonald says it is "disappointing to see yet another successful, globally leading UK technology firm being acquired by a foreign rival," adding: "It is striking that the UK does not seem to be able to provide the business environment for such acquisitions to be in the opposite direction."
However, he expects the deal to be completed, not least because Home Secretary Priti Patel previously acted as a strategic advisor to Viasat, being paid £1,000 an hour for five hours work a month. This relationship ended when she took up her cabinet post in 2019. "Not only are ViaSat already a supplier to the MoD, which makes it difficult to envisage national security grounds to stop the acquisition, but Viasat’s relationship with the current home secretary also shouldn’t be overlooked," Macdonald says.
What do the space industry changes mean for businesses?
Private investment is flooding in low-earth orbit satellites, which are cheaper to produce and launch and it is hoped can be used to deliver services such as 5G. Starlink, which is backed by Elon Musk's SpaceX, already has a working low-earth orbit constellation, and the UK government has invested £400m in OneWeb, which plans to build a constellation of its own.
Inmarsat itself has plans to develop low-earth orbit technology, but Ziebart says geostationary satellites are likely to remain important for businesses relying on precise navigation systems. "Perhaps internet connectivity will start to move away and become the domain of low-earth orbit satellites, but we will see safety-critical tasks remain on geostationary satellites for now because that technology is proven."
Indeed, Ziebart says tech leaders looking at the potential of low-earth orbit systems must bear in mind that big question marks remain over the technology. "Nobody really knows what will happen when we get thousands of satellites operating in low-earth orbit," he says. "We don't know if there will be interference, or if the space can even be maintained. There could be chaos coming in terms of traffic management.
"This is something the tech sector needs to be aware of. It will be a sea change and a new paradigm of communication, but at the same time there is a big element of risk around whether this will really work."