Bharti AirtelNSE 0.17 % has decided to merge its broadband satellite, or VSAT, business with that of market leader Hughes Communications India, to create a stronger no. 1 in the space, in a bid to increase scale, improve operational efficiencies and target new customers in areas such as in-flight connectivity.
In a statement Tuesday, Airtel said its VSAT business will be demerged into Hughes Communications India’s operations through a slump sale, but didn’t provide any financial details.
Hughes Communications will own 67% share of the new entity while Airtel will own the rest, people familiar with the matter said. They added that the new company will continue to be called Hughes Communications India Ltd., but the name could be changed in future.
Insiders revealed that closure of the deal may take between nine and 12 months, depending on regulatory clearances, and the merged entity will have a combined share of 63%. At present, Hughes has a 36% share of the market, while Airtel Business - the enterprise and VSAT arm of Bharti Airtel - has a 27% share. “The combined entity will be well positioned to leverage the demand for secure connectivity in a rapidly growing digital economy,” Bharti Airtel said in a separate statement on Tuesday, adding that the merged entity will be able to improve technology and offer new services to existing customers of Airtel and Hughes, and to new customers.
VSAT is used to provide satellite based telecom and internet access to individuals and enterprise users. In the telecom space, VSAT is becoming a critical technology for offering high speed data, or 4G services, in underserved and tough terrain areas, where telcos’ traditional networks are unable to make a headway.
Market sources reveal Hughes India’s revenue to be around Rs 350 crore for fiscal ending March 2019, while that of Airtel’s VSAT business is around Rs 150 crore. The VSAT market is estimated to be around Rs 1000 crore where 65% comprising services and the rest coming from products.
“We are very excited about the synergies that this partnership will bring to the Indian ecosystem. These are exciting times for satellite broadband service providers as VSAT becomes more mainstream, driven by growing demand from both, enterprise and government segments,” Partho Banerjee, managing director, Hughes Communications India Ltd., said in the statement.
The nature of VSAT or very small aperture terminal technology also makes it ideal for deploying in-flight services. With the government recently giving out licenses for in-flight services to telcos and third parties, the opportunity for players like Hughes and Airtel increases manifold, say analysts.
(The Economic Times)
Add new comment