On 9 May 2023, the CMA cleared the anticipated acquisition of Inmarsat Group Holdings Limited (Inmarsat) by Viasat, Inc (Viasat). Two weeks later, on 25 May 2023, the European Commission also cleared the transaction.
Both parties are satellite network operators that provide a variety of satellite connectivity services to commercial airlines, business aviation operators, and to a range of other sectors, including maritime, energy and government. The CMA’s investigation focused on the supply of broadband inflight connectivity (IFC) services—which allow passengers to access the internet while flying—to commercial airlines or business aircraft operators serving the UK.
In its Phase 1 decision, the CMA found that the parties were close competitors in a concentrated market, being two of a small number of suppliers that offer IFC services, and that airlines regarded them as close substitutes. The CMA highlighted that both parties were vertically integrated IFC providers that control their own satellite capacity, allowing them to offer lower rates and more service flexibility. Further, the CMA found that the parties were currently the strongest IFC providers available to airlines and that competition imposed by other suppliers would be insufficient to constrain the parties post-merger. As such, the CMA considered that the merger would give rise to a realistic prospect of a substantial lessening of competition in the supply of IFC services to business aviation. It therefore referred the merger for an in-depth Phase 2 investigation.
In its Phase 2 decision, the CMA maintained its Phase 1 finding that the parties competed closely and would likely remain close competitors in the next few years absent the merger. The CMA found, however, that other competitors—including a new entrant—would provide sufficient competitive constraints. The CMA found that Viasat and Inmarsat currently compete principally with three established suppliers of IFC services—Intelsat, Panasonic and Anuvu—and that these suppliers would likely exert greater constraints on the merged entity over the next few years. Further, the CMA found that Starlink—an emerging competitor—was likely to become a significant competitor over the same period. As such, the CMA concluded that the merger would not result in a substantial lessening of competition in the UK.
The European Commission cleared the same transaction also following a Phase 2 investigation. In reaching broadly the same conclusions, the Commission highlighted that the industry was nascent and growing and that there was significant excess broadband satellite capacity, creating opportunities for expansion, new entry, and new partnerships to emerge.
This is a relatively rare example of both the CMA and European Commission clearing a transaction unconditionally after Phase 2 investigations. It also illustrates the agencies’ willingness to place weight on the likelihood of new entry and future competition emerging in new and dynamic markets.