Hughes, Airtel to combine India VSAT biz; Hughes to hold majority stake in combined entity

Telecom operator Bharti Airtel and Hughes Communications India Ltd (HCIL) Tuesday said they will combine their VSAT satellite operations in the country, with Hughes holding a majority stake in the merged entity.

HCIL is a subsidiary of broadband satellite networks and services provider Hughes Network Systems.

The combination is aimed at driving scale and efficiencies to serve enterprise and government customers in India, and according to sources, Hughes will hold 67 per cent stake in HCIL, the surviving entity, while Airtel will have 33 per cent stake.

The announcement brings consolidation to the Very Small Aperture Terminal (VSAT) industry, after similar moves seen in the past in mobile services and tower markets.

VSAT is used to provide satellite based telecom and internet access to individuals and enterprise users, and is used extensively by banks and ATMs.

According to Trai estimates, the total number of VSAT subscribers in India stood at 2.87 lakh as in December 2018. The net addition during the quarter was 5,512, a growth rate of 1.96 sequentially.

The subscriber base of Hughes Communications stood at about 1.03 lakh, followed by Airtel (79,604) at the end of December 2018. Other players in VSAT market include Tatanet Services, HCL Comnet, and state-owned BSNL.

A market watcher pegged the size of the VSAT market at about Rs 1,000 crore, 65 per cent of which is services and the rest, products.

"The combined entity will benefit from enhanced scale, improved operational efficiencies and wider market reach. The combined entity will be well positioned to leverage the demand for secure connectivity in a rapidly growing digital economy," an Airtel statement said.

Hughes will have "majority ownership" in the combined entity while Airtel will have a "significant shareholding", it added.

Hughes and Airtel did not spell out the financial details of the transaction, which is subject to requisite approvals. However, sources said current revenue of HCIL itself is roughly Rs 350 crore.

HCIL is the largest satellite service operator in India, and provides broadband networking technologies, solutions, and services for businesses and governments.

Airtel is a significant VSAT service provider in India, offering satellite connectivity to unreachable terrains and helping businesses supplement their terrestrial networks with satellite for primary and backup connectivity.

"Hughes India and Airtel announce new satellite venture to serve enterprise and government customers in India. Combination of India's leading VSAT operators brings needed scale, efficiencies and reach to enable the networks that power Digital India," a joint statement said.

The combined entity will be positioned to introduce new VSAT and related technologies to deliver a range of products and services, and will continue to serve existing Hughes and Airtel customers.

Partho Banerjee, President and Managing Director, Hughes Communications India, said these are exciting times for satellite broadband service providers as VSAT becomes mainstream, driven by growing demand from enterprise and government segments.

"We are very excited about the synergies that this partnership will bring to the Indian ecosystem," Banerjee said.

Ajay Chitkara, Director and CEO, Airtel Business said the partnership will bring synergies to the forefront and combine the capabilities of both companies.

"We are pleased to combine our VSAT operations with Hughes to serve the connectivity needs of Digital India," he said.