Eutelsat thinks about buying Inmarsat, then decides not to

You know when something seems like a really good idea but then you sleep on it and wake up wondering what on earth you were thinking?

That seems to have been what happened at the top of EMEA satellite operator Eutelsat when it thought it might buy rival UK satellite operator Inmarsat (it’s apparently a legal obligation for every satellite company to have ‘sat’ at the end of its name). Yesterday it announced it was seriously considering it but today indicated it just can’t be bothered with the hassle.

“Eutelsat notes the recent speculation and confirms that it is currently evaluating a possible offer for Inmarsat,” said Eutelsat yesterday. “There can be no certainty any offer will be made, nor as to the terms of any offer.”

By today the party line was “Pursuant to market rumours, during the trading session on 25 June 2018, Eutelsat issued, at the request of the UK Panel on Takeovers and Mergers, a press release confirming that it was considering a possible offer for Inmarsat, without any certainty that an offer would be made. This statement was made in strict compliance with Rule 2.2 of the Code.

“Eutelsat hereby states that it does not intend to make an offer for Inmarsat and is consequently, except with the consent of the Panel, bound by the restrictions set out under Rule 2.8 of the Code applicable during six months from the date of this announcement.

“Eutelsat reserves the right to announce an offer or possible offer for Inmarsat or participate in an offer or possible offer for Inmarsat or take any other action which would otherwise be restricted under Rule 2.8 of the Code within six months from the date of this announcement in the following circumstances: (i) with the consent of the Board of Inmarsat; (ii) if a third party (including another publicly identified potential offeror) announces a firm intention to make an offer for Inmarsat; (iii) if Inmarsat announces a “whitewash” proposal or a reverse takeover; or (iv) if the Panel determines there has been a material change of circumstances.”

Take the lawyers out of the equation and the statement reads: ‘we’re not going to make an offer now but we might later.’ The FT reports that one of the main reasons Eutelsat decided not to bother with the move is that there are a bunch of political complications, especially from the UK side, and there was a decent chance it would be blocked.

ViaSat throws temper tantrum over European in-flight connectivity

ViaSat has decided to throw a hissy-fit over the Ofcom decision to grant Inmarsat a license for its European Aviation Network, threatening legal action over the move.

Ofcom must be sitting back and wondering if it is able to do anything right. Every decision it seems to make is met with a chorus of lawyers serenading the watchdog to the legal dancefloor. Three is usually the one who complains it isn’t getting more help despite not putting its hand in its pocket, and now ViaSat seems to be doing the same thing.

“We are extremely disappointed by Ofcom’s decision to grant Inmarsat authorization to operate its EAN,” said Rick Baldridge, ViaSat’s President and Chief Operating Officer.

“The facts are clear: Inmarsat is abusing the initial grant of the 2GHz spectrum, as set forth by the European Commission (EC) by changing the original tender granted to them with their intent to deploy a Pan-European terrestrial wireless network; and admittedly missing numerous deadlines as related to the original award.

“This blatant misuse of spectrum needs to stop now. It establishes precedent for any organization to use spectrum without following the rules. As we’ve publicly stated: we believe the EAN violates the original decision of the EU legislature that the S-Band be used for mobile satellite systems—not a terrestrial wireless network (also known as an Air-to-Ground or ATG).

“We remain diligent in our efforts to have the EC halt Inmarsat’s ATG deployments in the S-Band; declare Inmarsat’s ATG plans as inconsistent with EU law and the original S-Band spectrum award; and retender the spectrum.”

Having a screaming competition and throwing the spanner in the administrative works is not uncommon when the stakes are so high, but you do have to feel a bit sorry for Ofcom here. ViaSat seems to be a bit bitter that it is losing out to its rival Inmarsat, and is lashing out at the regulator. And here are two reasons why we feel a bit of sympathy for our friends at Ofcom.

Firstly, Ofcom is simply granting authorization for Inmarsat to operate its EAN. The European Commission is the body which awarded the EAN, Ofcom is just saying you can use it in the UK. ViaSat is currently taking the boresome bureaucrats in Brussels to a European court to block Inmarsat’s planned aeronautical-connectivity service, which is possibly where most of the attention should be directed. We can’t see what Ofcom has done wrong here to be honest.

Secondly, one of the ViaSat arguments is that this usecase was not outlined in the initial auction of the 2 GHz frequency band, and if it was, it might have paid a bit more attention. We think this is a bit unfair, as while we generally do not defend the lethargic legislators, are they supposed to list every possible usecase of these frequency bands? Crack out the crystal ball and consult the stars, this is unrealistic, as you would have to assume there will be there will be no innovation over the next couple of years.

It is also dangerous, as if you strictly limit the usecases if doesn’t offer any incentive or option to innovate and play around with new ideas. Imagine buying a frequency band, but the only ways to monetize it are the ones we have thought of now; you wouldn’t try to think of anything else and innovation would die! Some might be of the opinion that if ViaSat wasn’t able to have the foresight to understand that there might be a few new ideas in the future, it was the right decision to go down the Inmarsat route anyway.

Inmarsat is a UK company while ViaSat is American and seems to be bringing that country’s corporate culture into play. We didn’t get our way, so let’s sue someone. Welcome to the moaners club ViaSat, Three has got a chair waiting for you.

Inmarsat secures Ofcom endorsement of its European Aviation Network

Communications satellite company Inmarsat has received the all clear from UK telecoms regulator Ofcom to build ground based stations.

This seems to have been a necessary extra permission needed for Inmarsat to include the UK in its European Aviation Network, on top of the license to provide mobile satellite services over the 2 GHz frequency band, which was granted by both the European Commission and Ofcom back in 2009.

The need for CGCs (complementary ground components) is illustrated below by a diagram taken from Ofcom’s official document on the matter.

Ofcom satellite diagram

The use of the 2 GHz license for aeronautical, as opposed to terrestrial, coverage is contentious. Inmarsat competitor ViaSat, which presumably doesn’t hold such a license, is especially unhappy about it, arguing that the aeronautical use-case wasn’t on the table when the band was auctioned. The implication is that ViaSat would have had more of a go at getting some 2 GHz action if it had known this would be allowed.

We have some sympathy with ViaSat if that is how the auction process played out. Regulation can have a very profound influence on the fortunes of a telco and if in-flight connectivity turns out to be a big deal then those excluded from it are entitled to feel hardly done by. But with regional regulators like Ofcom giving it the all-clear it seems to be a done deal.