Viasat, Inc. VSAT aims to strengthen its position in the European broadband market by acquiring the remaining 51% stake of Euro Broadband Infrastructure (“EBI”). The Carlsbad, CA-based company holds a leadership position in the satellite and wireless communications market.
EBI is the wholesale broadband services business that was created in partnership with Eutelsat Communications EUTLF in 2016. It operates the KA-SAT satellite and provides fixed and mobile broadband services on a wholesale basis in the European and Mediterranean markets. Eutelsat initially owned 51% of EBI and Viasat the remaining 49% interest.
Viasat is now acquiring the 51% controlling interest for €140 million. The transaction, subject to customary conditions, is expected to close in the first quarter of 2021. Two years post closure, the €140 million in consideration may be adjusted up or down by up to €20 million, depending on certain financial metrics.
The wholesale business will add to Viasat’s retail broadband services business in select European countries, including Spain, Norway and Poland. Also, it will benefit Viasat’s in-flight connectivity service in Europe, providing a base for growth ahead of the launch of the ViaSat-3 global constellation. The second ViaSat-3 class satellite, which is planned for launch in 2022, will cover Europe, Middle East and Africa.
Viasat will be able to expand its mobility business and establish operations ahead of the launch of the ViaSat-3 service by gaining full control of KA-SAT. Moreover, through 100% ownership of EBI, the company will be better equipped to execute its distribution strategy by onboarding new local partners.
Per the agreement, Eutelsat and its subsidiaries will continue providing transitional services for a limited period to Viasat’s EBI business. Viasat will provide service continuity to the KA-SAT subscriber base of Eutelsat’s Bigblu Broadband Europe division.
Viasat continues to make progress on its ViaSat-3 global constellation amid challenges posed by the COVID-19 pandemic. The Satellite Services segment is benefiting from subscriber demand for broadband, which reflects the work-from-home and school-from-home environment with substantial growth in video streaming.
The Satellite Services business is progressing well, with key metrics including steady growth of ARPU (average revenue per user) and revenues showing impressive growth. ARPU is growing on the back of a solid retail distribution network, which accounts for a rising proportion of high value and high bandwidth subscriber base. Furthermore, the growing adoption of in-flight Wi-Fi services in commercial aircraft is proving conducive to business growth.
Viasat’s impressive bandwidth productivity sets it apart from conventional and lower-yield satellite providers that run on incumbent business models. Viasat has a competitive advantage in bandwidth economics, global coverage, flexibility and bandwidth allocation, which makes it believe that mobile broadband will act as a profit churner.
Viasat’s shares have lost 16.3% in the past six months against 52.4% growth of the industry.
It currently carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the broader industry are Plantronics, Inc. PLT and United States Cellular Corporation USM, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Plantronics delivered a trailing four-quarter positive earnings surprise of 568.2%, on average.
U.S. Cellular delivered a trailing four-quarter positive earnings surprise of 231.1%, on average.
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