Satellite Mergers Ahead?

Monday’s decision by the Justice Department to allow XM and Sirius to merge, combined with incumbents such as Verizon and AT&T winning much of the spectrum on offer in the 700 MHz auction, means we’re likely see M&A among the major satellite players in the coming year.

Had a new entrant won a lot of spectrum in the auction, they could have partnered with one of the satellite operators and potentially reduced some of the costs of building out a terrestrial network as well as gotten some extra spectrum. In the last few years, there has been a plenty of speculation over spectrum among MSS players, with operators including Iridium, Globalstar, ICO Global Communications, TerreStar Corp. and Mobile Satellite Venture are all trying to operate or build out networks.

Instead of launching a satellite only-business, these companies hope to take advantage of a combined terrestrial and satellite network to offer wireless services, most likely to carriers or to governments. But a shortages of spectrum for some players, plus a Justice Department willing to let satellite deals through, means many of them may team up rather than go it alone.

Tim Farrar of research firm TMF Associates says that, given the spectrum owned and the types of satellites launched, the likeliest deals would be between Inmarsat and MSV; ICO and TerreStar; and Globalstar and Iridium. 2008 will be the year to watch this sector.

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