As the sky is filling up with satellites, there is a growing need for antennas on the ground to keep in touch with them. Usually, these antennas are part and parcel of the larger satellite business, but French satellite operator Eutelsat Group is carving out its ground station business and EQT Infrastructure VI is looking to acquire 80 percent of it.

The new entity would have an enterprise value of €790 million, according to the deal announcement, which would put the 80 percent share at €632 million. Eutelsat Group is to retain the remaining 20 percent and stay on as an anchor tenant – its network of 37 GEO satellites and more than 600 OneWeb LEO satellites makes the company a considerable provider of satellite services. As anchor tenant, it will contribute significantly to the ground station revenue.

The satellite value chain

The satellite value chain begins at the manufacturers of hardware, which includes satellites and antennas. There are launch facilities too, including rockets.

Once the satellites are launched, operators can provide sateliite-based services, such as connectivity capacity, to companies that may resell it and possibly package it.

The ground infrastructure layer then enables connectivity between orbiting satellites and the ground.

Carl Sjölund, the EQT co-head of European digital infrastructure, explains the attraction of this segment.

“We have looked across the entire value chain of satellites and identified ground infrastructure as a very interesting niche as it resembles the TowerCo-model. We have a strong belief that the satellite industry is seeing a little bit of what we’ve seen in the telecoms industry with telecom companies starting to spin off their passive infrastructure. The same trend is emerging now in the satellite industry. And at the same time, the satellite industry is seeing a lot of growth especially when it comes to the low-Earth orbit segment.

“This will be the first carve-out of its kind; the first pure-play ground station operator.”

The ground station business

The announced deal involves approximately 1,400 antennas spread out across the world and servicing satellites belonging to Eutelsat Group and third-party customers.

All satellites are technically in ‘outer space’, as they are more than 100km above sea level, but that’s where the similarities end. Low-Earth orbit, or LEO, satellites are found at altitudes of less than 2000km above Earth. They are suitable for telecommunication, broadband services and for observing Earth from above. LEOs typically orbit the Earth in less than two hours.

Geosynchronous Equatorial Orbit, or GEO, satellites are fixed with regard to the ground and follow Earth’s rotation from a position about 36,000km above the equator. These satellites are generally used for broadcasting and monitoring weather.

Currently, there are 542 satellites in GEO, 7,939 in LEO (more than 6,000 of these belonging to Elon Musk’s Starlink) and 203 in between, according to independent satellite monitoring site orbit.ing-now.com. Each satellite must connect to a suitable parabolic antenna on the ground to be of use.

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Plots of land with such antennas are called teleports and require the presence of power, fibre and sometimes cooling.

To be a premier satellite ground station business provider comes down to up-time, the physical security of the site, and diversity when it comes to power and connectivity, according to Sjölund. Again, very similar to the data centre and the TowerCo businesses.

Indeed, “this transaction has, to a large extent, been using best practices from carve-outs, both of data centres and telecom towers”, he says. As for power, there will be some solar panels on-site along with backup generators, but the teleports in the deal are mainly powered by the grid.

Future growth

As the availability and use of satellite services expand, more satellites will be needed and hence more antennas and more and bigger teleports. At the moment, there is still capacity in the skies, and therefore on the ground, but as new satellite-service providers join the business, eg, Amazon’s planned 3,000 LEO-based network and the European Union’s IRIS² project, or existing ones such as Starlink expand, the ground base infrastructure must follow suit.

As has been the case for data centres and TowerCos, co-location is an obvious consideration, particularly for newer participants in the skies. “It is a much more flexible arrangement for the satellite operators to contract and do their planning with an independent player,” says Sjölund.

“We want to expand organically with more sites and build new infrastructure to get an even better footprint across the globe. New satellites are constantly being launched within the geostationary segment, but even more so in the low Earth orbit segment, where thousands of satellites will be deployed over the next few years. Those will need ground stations and those are not yet built.”

There is also an expectation to grow the business inorganically. Eutelsat’s carve-out may lead the way for other satellite operators but there are independent ground station operators too, such as Italy’s Telespazio – a joint venture between listed companies Leonardo and Thales – and the UK’s Arqiva, which is 49 percent owned by listed fund Digital 9 Infrastructure, currently winding down. Macquarie European Infrastructure Fund 2 owns 25 percent and IFM Investors 14.8 percent of Arqiva, with the rest in the hands of smaller shareholders.

The deal’s estimated 18 months from announcement to expected closing is “to do with it being across multiple jurisdictions. We have done the regulatory review and we’re confident that we will close the transaction”, Sjölund says.

When the carve-out does become reality, EQT’s sixth flagship will have gone where no infrastructure fund has gone before.