TAMPA, Fla. — Gogo is acquiring inflight connectivity rival Satcom Direct to counter rising competition from SpaceX’s Starlink in the market for providing Wi-Fi to business jets.
Satcom Direct would get $375 million in cash and five million shares from Gogo under a deal announced Sept. 30, subject to regulatory approvals, and up to $225 million in extra payments tied to performance targets over the next four years, suggesting around $636 million in maximum total proceeds.
Gogo has historically dominated the small and midsize part of the business aviation market and connects about 7,000 planes, according to William Blair analyst Louie DiPalma, while Satcom Direct has a commanding market share for long-haul.
Combined, William Blair estimates the companies are providing Wi-Fi to around 8,200 of the 9,200 business jets that currently have connectivity — or nearly 90% of the market.
“This is a nifty transaction from the standpoint that it likely would not have been approved by antitrust regulators if it were proposed as recently as last year,” DiPalma said.
However, he said regulators would likely approve the deal because Starlink has emerged as an existential threat to the entire satellite connectivity industry.
Air France recently became the latest major airline to announce plans to add SpaceX’s low Earth orbit (LEO) broadband service across its entire fleet.
Starlink’s business aviation customers include JSX, Pro Star Aviation and Flexjet.
DiPalma noted that Gogo shares have plummeted by roughly 70% from a peak in 2022 as Starlink gained momentum.
Multi-orbit plans
Gogo and Satcom Direct enable Wi-Fi on planes via an air-to-ground (ATG) network of terrestrial cellular towers and capacity leased from satellite operators in geostationary orbit (GEO).
Gogo has used GEO satellites from Intelsat, SES and Eutelsat, while Viasat is Satcom Direct’s main capacity provider.
The companies have partnered separately with Eutelsat’s OneWeb LEO constellation to provide multi-orbit broadband services next year.
The incoming LEO service for business airlines from Gogo, which sold its commercial aviation division to Intelsat four years ago, is called Galileo and uses an electronically steered antenna (ESA) from Hughes.
Satcom Direct, which generates a fifth of revenues from connecting military and government customers, has ordered LEO ESA terminals from Israel’s Gilat Satellite Networks.
Gilat announced a $245 million deal in June to take over Stellar Blu, a Texas-based aircraft equipment integration specialist, to bolster its place in the fast-evolving inflight connectivity market.
“This transaction accelerates our growth strategies of expanding our total addressable market to include the 14,000 business aircraft outside North America,” Gogo chair and CEO Oakleigh Thorne said in a news release.
He added: “This transaction also uniquely positions us to sell our Galileo LEO solution integrated into Satcom Direct’s GEO and L-band offerings as part of a multi-band, multi-orbit solution for the fast-growing military/government mobility market.”
DiPalma noted that the deal also helps Gogo upsell Galileo LEO services to prevent Satcom Direct customers from defecting to Starlink.
Novaspace consultant Vishal Patil said the acquisition would open up the international business aviation market to Gogo, which is currently largely confined to North America.
SmartSky, which aimed to compete with Gogo in North America, recently shut down operations after failing to raise funds for its ATG network.