June 11, 2018 / 12:53 PM / in 4 months

Inmarsat could draw more suitors after rejecting EchoStar

(Reuters) - Shares in British satellite company Inmarsat Plc surged around 12 percent on Monday after the company rejected a bid from U.S. company EchoStar late last week.

FILE PHOTO: Member of staff at satellite communications company Inmarsat point to a section of the screen showing the southern Indian Ocean to the west of Australia, at their headquarters in London, Britain, March 25, 2014. REUTERS/FILE/Andrew Winning/File Photo

The approach may have fired the starting gun on a bidding war for the British company, which has a market capitalisation of around 2.4 billion pounds ($3.2 billion), given the perceived value of its spectrum of telecom frequencies, analysts said.

Inmarsat was set up in 1979 to enable ships to stay in touch with shore or to call for help in an emergency, but the value of its network has grown with a diversification into services for phone networks and broadband providers.

Its shares stood at 532.7 pence by 1000 GMT, up 12.3 percent on the day.

Demand for satellite networks can change more swiftly than the years it takes to build and launch satellites, and Softbank, Google and Facebook have all been looking at or investing in the area recently.

FILE PHOTO: A technician looks at a solar panel on the Inmarsat S-Band/Hellas-Sat 3 satellite in the clean room facilities of the Thales Alenia Space plant in Cannes, France, February 3, 2017. REUTERS/Eric Gaillard/File Photo

Inmarsat gave no value of the Echostar offer in its statement on Friday saying it had rejected the approach as undervaluing it, but analysts from RBC Capital Markets said its spectrum could be worth as much as around 10 pounds a share.

RBC raised its price target on the stock to 850 pence from 725 pence per share. It cited ViaSat, Eutelsat communications and SES as possible rival bidders.

Inmarsat’s spectrum looked particularly complementary to the frequencies owned by Echostar sister company DISH and would broaden Echostar’s own existing European spectrum, it added.

“Owning Inmarsat would allow Echostar to have the same frequencies in Europe that DISH owns in the US,” RBC analysts said.

The company has also been investing in trying to bring reliable internet to airline passengers worldwide.

Morgan Stanley analysts said buying Inmarsat and the 13 satellites that provide services to airlines, broadcast media companies and the oil and gas industry, could allow Echostar to outpace ViaSat in the race to achieve fully global coverage.

However, some commentators also pointed to possible regulatory hurdles given that Britain classifies satellite infrastructure as strategic.

Reporting by Sangameswaran S in Bengaluru; editing by Patrick Graham and Keith Weir

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