Is a wave of M&A sweeping the satellite communications sector? Amazon and AST SpaceMobile reportedly vie for Viasat, while SpaceX sets its sights on EchoStar.

Satellite industry consultant Tim Farrar noted in a recently published report that market expectations for a deal between Amazon.com, Inc. (AMZN.US) and Viasat (VSAT.US) are heating up. He said: "What really excites many of the people I speak with is the expectation that Amazon.com, Inc. will soon announce an acquisition of Viasat. The acquisition would primarily be about securing the international spectrum resources held by Viasat, while also integrating Viasat's Ka-band geostationary orbit (GEO) business with Amazon.com, Inc.'s low Earth orbit satellite internet service Leo, and strengthening Amazon.com, Inc.'s position in government and aviation markets." He also predicted that if Amazon.com, Inc. completes the acquisition, the Equatys joint venture between Viasat and Space42 would come to an end as a satellite program. However, Amazon.com, Inc. would still need to work with Space42 to coordinate its use of L-band spectrum in the Europe, Middle East and Africa region. Meanwhile, Tim Farrar added that AST SpaceMobile (ASTS.US) has attempted to organize a competing acquisition offer for Viasat, but that effort would face financing and management obstacles. He said: "I also hear that AST SpaceMobile has tried to organize a competing acquisition offer, but that would require strong support from telecom operators, and Viasat management would strongly oppose it." "By contrast, selling Viasat to Amazon.com, Inc. could be seen as an honorable exit, completing the deal before Viasat's existing geostationary orbit business is completely crushed by competition from low Earth orbit satellites." The speculation comes just after the U.S. Federal Communications Commission (FCC) approved Amazon.com, Inc.'s $11.5 billion acquisition of Globalstar, pushing Amazon.com, Inc. further into direct-to-device (D2D) satellite connectivity services. The deal is expected to close in 2027. The transaction will give Amazon.com, Inc. access to 25 megahertz of internationally coordinated mobile satellite spectrum and related infrastructure, enabling phones and other devices to connect directly to satellites. The FCC said the deal is expected to expand network coverage, strengthen emergency communications, and improve utilization of the relevant spectrum, while being unlikely to cause substantial harm to the public interest. Amazon.com, Inc. has also filed a pending application to deploy up to 5,105 D2D satellites and has agreed to continue supporting Apple Inc.'s satellite services. Tim Farrar also pointed to risks in the spectrum arrangement between AST SpaceMobile and Ligado. He said: "AST SpaceMobile's relationship with Ligado remains tense. Because AST's payments to Ligado are only sufficient to cover Ligado's ongoing lease payments to Viasat, Ligado is unable to benefit at all from the mobile satellite service (MSS) spectrum, despite the high valuation currently placed on it." He suggested that Ligado might give up its spectrum rights in a settlement with the U.S. government, leaving AST SpaceMobile exposed to potential risk. In Tim Farrar's view, acquiring Viasat would help strengthen Amazon.com, Inc.'s competitiveness against SpaceX (SPCX.US) in satellite communications, and telecom operators increasingly see Amazon.com, Inc. as a counterweight to SpaceX. He said: "In the D2D market, as confidence that AST SpaceMobile can ultimately provide practical services continues to weaken, telecom operators see Amazon.com, Inc. as the most realistic potential 'savior.'" In addition, Tim Farrar linked the "missing piece" mentioned by Musk on SpaceX's earnings call last week to a possible stock-funded acquisition by SpaceX of the remaining business of EchoStar Corporation Class A (ECHO.US). He believes the deal could give SpaceX access to DISH Wireless's network assets as well as additional AWS-3 and CBRS spectrum resources; at the same time, SpaceX could also use it to replace the cash payments involved in its previously reached agreement to acquire AWS-4 and Band 70 spectrum. He said: "Given that the mediation process will continue until November 4, it would not be surprising if a deal were announced as early as next week. However, Ergen (chairman of EchoStar Corporation Class A) is known as a tough negotiator, which could make it difficult for the two sides to agree on a transaction price."