The Viasat/Inmarsat Deal: One Year Out

After years of the satellite industry’s top brass making the case for consolidation, those dreams are finally playing out across the top operators. While Viasat was the first to take the leap with its Inmarsat bid, much of the industry has since followed suit.

When the acquisition closed last summer, the Carlsbad, California-based business was preparing for global expansion with the trio of ViaSat-3 high capacity satellites that had been in the works for years. U.K.-based Inmarsat brought global coverage to the table, with its fleet of Ka-band and L-band satellites.

What happened next has been well documented. Soon after clearing a lengthy approval process to close the deal in early summer of 2023, Viasat experienced a shocking setback when the first ViaSat-3 satellite had a major anomaly, slashing the satellite’s available capacity. Later that summer, the I-6 F2 satellite also suffered an “unprecedented” anomaly. These anomalies forced the operator to recalibrate while it was going through the integration process.

Now one year after the acquisition closed, Via Satellite caught up with the Viasat leadership team to talk about the business integration, ViaSat-3 ramifications, and how they see the opportunity for global scale amid a changing industry.

The acquisition is a compelling story bringing together two industry titans with vastly different backgrounds. Viasat began as a startup in California out of founder and CEO Mark Dankberg’s home, while Inmarsat originated in the United Kingdom as an intergovernmental organization.

Dankberg says his view of the value proposition of the combined company hasn’t changed in the last year, and he sees that value in combining Viasat’s entrepreneurial spirit and technology with Inmarsat’s global presence and strong customer relationships.

“At its most basic level, Inmarsat represents global cooperation to achieve important missions in space. That's a really good foundation and legacy to build on,” Dankberg says. “Then that sense of urgency, scrappiness, and innovation that Viasat has is going to be really important. Considering that both companies are in a market-based environment, I think we can combine those two things to create something more powerful.”

Before the acquisition closed, Viasat hired President Guru Gowrappan to work closely with Dankberg on the company’s global operations and growth strategy. Coming from outside of the satellite industry, Gowrappan was previously CEO of Verizon Media Group, and had also held leadership roles with Yahoo, e-commerce giant Alibaba, and gaming company Zynga.

Gowrappan, who has been part of more than 30 large-scale acquisitions in his career, says the company still had a strong financial performance despite the challenges with the satellite anomalies.

“We've gone through so many bad luck things in the last year, our stock price, [etc.], but we get up problem solving,” Gowrappan says. “Mark is deeply entrepreneurial. He's not sitting back and saying ‘Let’s keep our heads down.’ He’s saying ‘Let’s go execute.’”

After the ViaSat-3 issue, Gowrappan says the team accelerated the merger activities more quickly to achieve cost savings. As the scope of the ViaSat-3 issue came into focus, Viasat laid off 10 percent of the combined company’s workforce, about 800 employees, in November 2023.

Gowrappan says that early on, the integration was focused on low-hanging fruit to take advantage of cost efficiencies and synergies. “But if you look at the team mindset, it’s now — let’s go win. Let’s go focus on growth. Let's go get customers and work as one team,” he says.

Gowrappan talks about how his previous experience with Verizon in the connectivity business gives him a different perspective that he brings to Viasat.

“I come with a view on — How do you monetize differently? How do you think about business models? How do you think about customers, even from a consumer lens? How do you bring in these values to create a network effect?” he says. “The world has changed when you think about the velocity and the quality of product. The satellite industry is going through that transformation. I bring in a different lens.”

While the satellite industry has debated orbits for years, Gowrappan sees the differences between Low-Earth Orbit (LEO) and Geostationary Orbit (GEO) as “just orbits,” when the focus should be on customers and their use cases, optimizing the capabilities of both to bring the best solution to customers.

Instead of thinking about each vertical independently, Gowrappan talks about Viasat being a product platform company, with foundational tech that is scaled across verticals.

“We can build once but ship it 1 billion times,” he says. “Can I build common elements? Versus thinking about these things vertically, I'm thinking about these things as a platform and taking it across other new markets as well.”

Preserving Inmarsat’s Heritage in Maritime

One example of bringing together the innovation and technology of Viasat with Inmarsat’s customer base is the recent Nexus Wave managed service debut for maritime connectivity, which bundles the Global Xpress (GX) Ka-band network with LEO services through a capacity agreement with OneWeb.

Maritime President Ben Palmer says that NexusWave is an example of the acquisition unlocking investment and product development that Inmarsat did not have access to before because the company was managed more conservatively to yield free cash flow.

“The pace that we've been able to move from business case through into investment decisions, and now into deployment, is in a large part down to coming together with Viasat,” Palmer says. “One of the things that I've been really pleased with is that we unlocked some of that investment and product development know-how and that technology focus to [move forward] on some important product development activity.”

Palmer started his role at Inmarsat the same day news of the acquisition broke. At the time, Inmarsat’s maritime business was the largest segment of the company but it had been shrinking for years, he said. Palmer was brought in to turn it around during the acquisition process.

Palmer is now one of just three former Inmarsat leaders on Viasat’s top executive team of 14 people, along with Government President Susan Miller and Global Operations President Jason Smith.

The maritime business remains under the Inmarsat name as Inmarsat Maritime, a Viasat company. It is the only part of the business to retain the Inmarsat name.

“I felt — and luckily so did my new colleagues on the Viasat executive leadership team — that there was huge value in the Inmarsat brand, particularly in the maritime world, where Inmarsat has been for 40 years,” Palmer says. “We've been the market leader for many, many years. It was important to me in terms of sustaining the value of the business and enabling us to continue to grow, that we sailed forward under the Inmarsat brand, under the Viasat banner.”

Palmer says that trust, certainty and confidence are critical to the maritime customers who have relied on Inmarsat safety services at sea for decades.

“It’s to our team's credit that we've come through a period of ambiguity and uncertainty over the last several years having grown the business and having sustained and renewed some of those relationships. I think that's largely due to the effort we put in through the process to manage it,” Palmer says.

A Deeper Focus on Mobility

Before the ViaSat-3 launch, Viasat said its top markets for ViaSat-3 F1 capacity were broadband and mobility. In the light of ViaSat-3’s diminished capacity over North America, Viasat has honed in on mobility as a key market, shifting focus away from broadband. The satellite is offering about 10 percent of the capacity that was expected, but will soon enter service.

This also shifts some of Viasat’s core business further from competing with SpaceX’s Starlink constellation, which has gained traction in the consumer broadband market in the U.S. and globally. According to a recent report by Quilty Space, Viasat and Hughes Network Systems achieved a peak combined subscriber base of 2.2 million broadband subscribers in the first quarter of 2020 when Starlink was kicking off. The Quilty report said that Starlink achieved that number of subscribers within 36 months, while Viasat and Hughes subscriber totals declined by 30 percent.

After the headline-grabbing Delta deal last year, Viasat has continued a steady drumbeat of in-flight connectivity (IFC) contract wins in 2024, with deals with Royal Jordanian Airlines, Korean Air, Lufthansa Group, Qantas Airways, and Icelandair.

The mobility focus encompasses all moving platforms, whether it be ships, airplanes, trains, cars, buses, etc, Dankberg says. Viasat is focused on the technology and capacity to meet mobility customers with the connectivity they need, where they are.

“What's interesting about the mobility market and what people find kind of counterintuitive is that pretty much all the journeys begin and end in major metro areas, whether you're moving goods or people,” Dankberg says. “If you look at the data of where airplanes fly, where ships spend their time, or trains go — most of their time is in a very small fraction of the Earth. That creates a unique opportunity. If you can build bandwidth and deliver it in a way that matches that efficiently — that's going to be really competitive.”

A More Collaborative Ecosystem

The satellite industry is in a very different place from when Viasat first placed its bid to acquire Inmarsat back in 2021. Since then, SpaceX has continued to bulk up the Starlink constellation, moving into enterprise markets that were once considered the domain of the traditional operators, like government, cruise, and maritime.

The traditional operator dynamics are shifting as other operators have followed suit to consolidate, with Eutelsat's deal for LEO operator OneWeb announced in 2022, and two other industry giants of SES and Intelsat finally making the deal to combine.

The two “mega-operators” will have similar financials. The combined Viasat/Inmarsat delivered $4.3 billion in revenue in fiscal year 2024. SES reported the combined company expects revenue in calendar year 2024 to be $4 billion.

Both Dankberg and Gowrappan say that the SES/Intelsat news hasn’t changed their perspective on what Viasat needs to do to be successful, but confirms the merger was the right path.

“They all have products that compete with us when we go into an RFP process with an airline or any other customer, and we won some of those things. It’s a market, so it’s OK if you lose some of them. They’ve seen the strength we bring to the table,” Gowrappan says. “[These mergers] validated the path we are on. That doesn't mean we're going to sit idle. We are aggressively making sure we are very customer-centric.”

Without naming SpaceX or Amazon, Dankberg says he believes there is an existential threat to the satellite industry from very well funded, vertically integrated companies.

“The whole satellite ecosystem is under attack by totally vertically integrated companies,” he says. “One of the foundations of that is attacking spectrum resources, orbital resources. If other countries and companies don't have access to orbits and spectrum, it’s pretty hard to do communications from space. I think connecting all of those dots is the single most important thing in the satellite industry right now.”

While some people say there is only room at most for three to four LEO constellations to be successful, Dankberg cautions against the international implications of a few constellations taking up all of the look angles and spatial separation in the orbit.

“Countries want assured access to their own space systems,” he says. “This goes back to some of the heritage issues that Inmarsat has dealt with from its founding. How do countries cooperate in a way that they can share some of these resources, whether it's spectrum or orbital slots?”

While Dankberg has long been critical of large Low-Earth Orbit constellations, it’s clear his thinking on LEO is evolving in terms of future opportunities. Viasat is now working with OneWeb for capacity for NexusWave, and Dankberg says the company is open to partnering with any NGSO ventures that want to work together. He also chairs the recently created Mobile Satellite Services Association (MSSA), which is focused on promoting a collaborative direct-to-device (D2D) ecosystem.

Through the MSSA, Dankberg has a vision of a LEO system where different operators share the same satellites, in the way that telcos share access to the same cellular towers. This would bring together countries with L-band and S-band licenses to become part of a global roaming constellation for direct-to-device service, sharing assets and collaborating with standards-based ground infrastructure.

“You can have virtual constellations that allow dozens of countries to participate in LEO,” Dankberg says. He believes this will answer critical issues countries have such as, “‘Where is my place in the sky, how do I know I have it? How do I know other people's satellites aren't going to crash into mine?’ These are problems that nobody has dealt with before, and I think they are going to be absolutely fundamental to the expansion of the space industry. Having just three or four constellations in space that own those orbits is not going to be stable.”

Gowrappan offers a similar view on what Viasat is trying to create and how it plans to compete in this changing marketplace of consolidating major players.

“We approach the market to create an ecosystem. We want to bring in others, let them also monetize and share the ecosystem,” Gowrappan says. “That’s a very different philosophy. It creates more inclusivity in a good way. Customers in the end win because they have many more competitors. I think room for an ecosystem and partners is a healthy value chain. Most of the markets we are in have room for several players.” VS