ViaSat to Spend $568 Million for WildBlue

The transaction needs the approval of the Justice Department, the SEC, the FCC, which licenses WildBlue’s gateways and Earth terminals, and the Canadian Radio-TV and Telecommunications Commission, which licenses WildBlue’s two satellites. WildBlue plans to work closely with the regulators and believes the government agencies will conclude the acquisition would increase the availability of broadband service to rural consumers, Wild Blue CEO David Leonard said in an interview. An official with the FCC’s International Bureau said he wasn’t aware of any transfer filings yet. Once they're filed, the bureau will publish a public notice asking for comment and will review the application. The official said the specifics of the application will determine how long the review will take.

The deal will give WildBlue shareholders and creditors $443 million in cash and $125 million in new ViaSat common stock, the company said. ViaSat has long worked with WildBlue, manufacturing terminals for the company and other satellite broadband providers. The companies began discussing the purchase during the summer, Leonard said.

ViaSat 1 will provide a “huge leap in capacity,” a welcome increase for WildBlue, whose customers already strain its resources, Leonard said. The provider uses capacity on two satellites, Anik-F2, owned by Telesat Canada, and WildBlue-1, both located in the 111 degree west orbital slot. ViaSat doesn’t expect substantial subscriber growth until ViaSat 1 is launched, ViaSat CEO Mark Dankeberg said in a conference call Thursday.

WildBlue has about 400,000 subscribers around the country. The company mainly serves the most rural regions and it considers areas with less than 100 homes per square mile its core market. The rural areas around densely populated regions take up the most capacity, putting a serious strain on the system, Leonard said. The company agreed to the transaction because it “fits nicely with our needs for expanded capacity,” he said. The new satellite will support 1.5-2 million new subscriptions, he estimated.

Liberty Media, which controls about 37 percent of WildBlue and would become a significant shareholder in ViaSat through the acquisition, will choose a representative for WildBlue’s shareholders on the ViaSat board, ViaSat said. Liberty Media declined to comment.

WildBlue and ViaSat applied separately for federal money meant to expand the reach of broadband to rural areas (CD Sept 11 p1). Each is working with EchoStar. A spokesman for EchoStar, which has a small stake in WildBlue and leases it capacity, said, “It’s going to provide a stronger partner for our stimulus fund proposals.” WildBlue CEO Leonard said he hopes that the acquisition “enhances the probability of the satellite industry achieving a stimulus win,” but it’s too soon to handicap the companies’ chances.

Secretary General David Hartshorn of the Global VSAT Forum sees the purchase as part of the industry’s maturation. Noting that Hughes, the largest satellite broadband provider, started out making equipment for other providers before it became one itself, Hartshorn said the acquisition allows ViaSat “to provide end-to-end broadband connectivity for their subscribers. … This is the latest movement by the industry in a direction toward more vertical integration, more turnkey abilities, and more control within the organization over each stage and each step of value proposition in the market place.”