-
The combined entity would bring together a growing portfolio of GEO and MEO satellites
-
Transaction not expected to close before second half of 2025
-
Deal to be financed by cash and debt
Luxembourg-based satellite operator SES said it will buy 100% of Intelsat for $3.1 billion, bringing together two major geostationary Earth orbit (GEO) satellite operators amid rising competition from low Earth orbit (LEO) constellations such as SpaceX-owned Starlink and Amazon’s Project Kuiper.
The announcement coincided with the presentation by SES of its financial results for the first quarter of 2024 and comes hot on the heels of the launch of O3b mPOWER, its second-generation software-enabled satellite system operating at medium Earth orbit (MEO).
SES said it will finance the transaction using existing cash, estimated at about €2.4 billion by the end of March, along with new debt. Based on the 2024 financial outlook, the combined entity is expected to generate about €3.8 billion in annual revenue with expected low- to mid-single digit average annual growth over the medium-term. Capex is pegged at about €1 billion in 2024. The proposed transaction is expected to complete in the second half of 2025.
Initial responses to the deal have been mixed, with analysts citing the high levels of debt as one concern. According to Reuters, Antoine Lebourgeois at Bryan Garnier said the combined entity “risks suffering from relatively high leverage, precisely at a time when traditional operators are grappling with escalating cost of debt and diminishing capital returns.”
Second time around
This is also not the first time that SES and Intelsat have attempted to bring together their respective operations, although previous merger talks collapsed in June 2023. During Tuesday’s earnings call, SES chief executive Adel Al-Saleh said a lot has changed compared to a year and a half ago, when Intelsat had only recently emerged from Chapter 11 proceedings.
“The structure of the transaction is much simpler,” he added, noting that an acquisition of Intelsat by SES, rather than a merger of the two companies, is “a lot easier” from a regulatory perspective.
“But the biggest thing was the desire of both companies to build something unique here. We both saw that opportunity to create something valuable to our clients into the market and solidify the company for the mid-term … That’s what’s different in my mind,” he said.
Al-Saleh, the former CEO of Deutsche Telekom-owned T-Systems who joined SES in February 2024, also noted that strategic discussions about the company’s future were already underway when he took on the CEO role.
“It was clear to us that this particular transaction, if we’re able to successfully close it with the right type of value, is the most compelling proposition we had on the table,” he said.
Orbiting deals
Should the transaction be approved, it will create a company with a combined fleet of more than 100 GEO and 26 MEO satellites. Eight new GEO and seven new MEO satellites are expected to be launched by the end of 2026. According to SpaceNews, Intelsat has also been in talks with the U.S. government to help fund 17 MEO satellites.
“This is a highly dynamic market. There is new competition, this market is moving very fast. [There are] new LEO entrants that are launching their constellations. There’s rapid innovation, both in space as well as the ground, new technologies coming into effect. So having scale and a multi-orbit capability is critical to success,” Al-Saleh said.
He added: “We’re not just a GEO player. We are an all-orbit player, but we have a very strong GEO capability.” And while the company has not itself built LEO constellations, “we have leveraged very strong partnerships and capabilities in order to be able to deliver a compelling solution to our clients.”
For example, SES has certain agreements with Starlink while Intelsat’s partnership with Eutelsat includes access to the latter’s OneWeb LEO constellation.
David Wajsgras, who was appointed CEO of Intelsat with effect from April 2023, remarked that US-based company “has executed a remarkable strategic reset” over the past two years.
“By combining our financial strength and world-class team with that of SES, we create a more competitive, growth-oriented solutions provider in an industry going through disruptive change,” he said.