Andrew DeGasperi is Macquarie Group Limited’s satellite stock expert. He sees some interesting developments on the horizon: “…on the satellite side, I would say this is not a sector that traditionally was seen as ripe for consolidation. Part of the reason for this is that some of these assets either have a significant degree of government ownership and were viewed as mature businesses particularly on the video side, or they’re big enough to attract antitrust scrutiny. But then, SoftBank (TYO:9984) just a few weeks ago attempted to acquire Intelsat (NYSE:I).”
The support for these services comes from the US Government: “…the U.S. Department of Defense is actually their largest consumer of bandwidth globally. As you can imagine, most of it is driven by the increasing use of drones for ISR purposes — intelligence, surveillance and reconnaissance — at a global level. And those drones use a lot of commercial satellite bandwidth because they’re streaming a lot of video or providing troop Wi-Fi.”
This revenue dominance by the military may be coming to an end as satellite supported data networks begin to compete with speedy terrestrial services: “…satellites are able to handle a lot more data than in the past, and there are expectations that some of these satellites could potentially bring 10 times the data capacity of what was launched as recently as a four to five years ago. So there’s a lot of excitement behind that because it would potentially enable some operators to deliver broadband at attractive speeds.”
“For example, Jeff Bezos from Amazon recently made a big keynote speech at the satellite conference earlier this year, and it sort of indicates that people are starting to view space companies more favorably, and that could potentially attract even more M&A interest in the future from Silicon Valley.”
For more insight from Andrew DeGasperi of Macquarie Securities read the entire interview at the Wall Street Transcript.