Soon after naming new CEO Rick Baldridge, Viasat announced a major move in Europe that the company will  buy the remaining 51% share of Euro Broadband Infrastructure (EBI), a wholesale business created with Eutelsat, for 140 million euros ($167.5 million). While this deal marks an end to a particular chapter, it is also the start of a new one for Viasat, as it gets set to step up its presence in Europe, as well as a number of other major global markets, ahead of the launch of its Viasat-3 satellites next year.

In this first Via Satellite interview, Baldridge talks about everything from this deal, to Viasat’s global ambitions, as well as what it will be like to follow on the footsteps of Viasat founder Mark Dankberg. Some analysts including Giles Thorne of Jefferies believes Eutelsat got the better end of this deal, but Baldridge is confident the deal will ultimately be a win/win for both.

VIA SATELLITE: Why did Viasat do this deal for EBI? What is the rationale behind doing this deal from your perspective?

Baldridge: You have to unwind and look back at the original JV partnering agreement. We made the decision, and had approval from our board, to build three ultra-high capacity satellites that would cover the globe. One of them would be over EMEA [Europe, the Middle East and Africa]. So, prior to entering the European market, we approached Eutelsat and their former CEO Michel de Rosen — with whom we had a long partnership and good history—with a partnership arrangement, as we thought it was inappropriate for us to enter our customer’s market without talking to them first. We talked to Michel, shared our plans and told him we would be happy to have them as a partner. We worked together to establish the JV, with the intent that they would be a partner in the ViaSat-3 project over EMEA.

But as business goes, Eutelsat had a management change and decided to head into a different technical direction. Even though we both tried to make the original JV partnering agreement work, we both realized the JV didn’t make much sense based on our diverging interests. Initially, they exited their 49% ownership of the retail JV which left us with a 49% ownership of the wholesale JV. We are purchasing the remaining 51%.

I think the timing works quite well for Eutelsat, in that their KONNECT satellite is coming on board. The timing works quite well for us too. Without this, we would have been restricted in our ability to hit the ground running and be ready to go-to-market when ViaSat-3 launches over EMEA and that marketplace. This is a natural conclusion for both parties and interests.

 VIA SATELLITE: How can you be successful in terms of European broadband? What have been the key learnings for the first 10 years?

Baldridge: The European market is quite different from other broadband markets. And when we look at our broadband business globally, we are proud to be doing well in Mexico and Brazil; we recently kicked off activities in Guatemala; have a nascent start in Africa; and are starting to understand the Australian market quite well.

We are building a set of tools that aren’t a one size fits all set of tools, but tools that take into consideration local market characteristics. We believe it’s important that we have a strong local presence and plan to run our European broadband businesses with management teams and local skilled talent based in Europe, not in California.

It is our full intent to have a much stronger presence in Europe — and we have plans to grow our current European team, enabling them to run this effort out of their region. We think the tools we’ve built are very good for that market. We tend to lean very close to the consumer, which helps us understand and learn market and customer dynamics. In some areas, we may sell Direct-to-Home [DTH], but in other cases we may use distributors. We do that today in the U.S. with DirecTV and Dish, and it’s been successful. But, the majority of our subscribers are direct and have been acquired through our sales channels. It allows us to understand the concerns of our subscribers directly. We believe this model will work well in Europe too. 

VIA SATELLITE: How big is the addressable market for consumer broadband in Europe here for Viasat?

Baldridge: We believe the European consumer broadband market is growing. Much of that has to do with what consumers want to do with their internet today, as well as the performance and speeds they need to optimize their internet interests. For example, in the U.S., we have lots of customers on our 100 Mbps speed plans. At 100 Mbps, satellite is quite different to when it was 512 Kbps or 10 Mbps or 25 Mbps.

Our 100 Mbps performance expands the addressable market for us. We know that the primary driver in consumption growth on broadband networks is driven by video; it is really about video viewing hours. So, we are focused on how we can manufacture bits cheaper than anyone else, and in areas where we think the demand is best. That is primarily why we are at GEO [Geostationary Orbit]. We think there is demand for growing, unique content, not linear and broadcast content to individuals. It is a combination of OTT [Over-the-Top] and customized content. We see demand in aero for that content as well and think Europe will experience that same phenomena.

VIA SATELLITE: What would be a realistic target for subscribers for Viasat consumer broadband in Europe five years from now? 

Baldridge: We don’t disclose specific European subscriber numbers, but I can say that we plan to gain subscribers across multiple verticals. We are going to be in aero, direct-to-consumer residential, community internet, government, enterprise and more. For example, maritime and land mobile services are new markets that we will be entering. We are also investing and developing in technology, like low-cost phased array terminals to expand our footprint on where we can go.

It’s interesting because we have a very diverse customer set, and while the market thinks we are dependent upon individual residential subscribers, we see this as just one sector where we have had early-on success. We like that market a lot, but there are multiple markets where we offer service and where we fully expect to continue to grow our market and mindshare as we expand our services globally with the ViaSat-3 constellation.

VIA SATELLITE: Compared to say North America and other regions, what percentage of revenues could you ultimately derive from Europe? 

Baldridge: Europe will be an important market for us, but at this time we don’t disclose regional forecasts or revenues. I do believe we will perform quite well in Europe — as we expand our local segment opportunities. I believe the EBI transaction will give us a solid runway to build our presence in the region before the full-scale launch of our ViaSat-3 services.

VIA SATELLITE: KA-SAT is almost 10 years old. It’s an old satellite. What are you planning to do with it? What value does a satellite developed in 2008/2009 have as you look to serve customers in the 2020s?

Baldridge: Great question, because we’ve seen this play out successfully in our history before, and we expect a similar outcome with KA-SAT. We first entered the broadband services market around 2009, after acquiring WildBlue Communications. They had two previous generations of satellites, WildBlue-1 and Anik F2 that we acquired as part of that deal. We successfully integrated those satellites into our fleet, maximizing the benefit of them, and continue to use both satellites as part of our network.

We see KA-SAT in a similar light. It will be integrated into our network and will be used for aero or residential initially and possibly to experiment in entering new European markets like enterprise, maritime, and other segments. We are able to blend that mix of capacity, and if you understand Moore’s Law, that cost skews to much closer to the average cost of your latest invention. By integrating the KA-SAT satellite into our network, we think we can get economic yield through it to the end of its life.

VIA SATELLITE: Giles Thorne, a satellite equity analyst at Jefferies put out a research note on the EBI deal. He didn’t hold back and basically said Eutelsat got a much better deal here. He said, “In this final coup de grâce, Eutelsat has managed to get Viasat to pay 120-160 million euros (50-70 million, ex-cash) for a controlling stake in JV vehicle that owns a technologically obsolete KA-SAT (and associated revenue streams, which will imminently migrate to KONNECT).” How do you respond?

Baldridge: I highly encourage him to read his history books — and see what occurred when we acquired the WildBlue satellites. When you think about that deal and the yield we have achieved off of WildBlue-1 and Anik F2 — it became a really nice transaction for us. So, with that frame of mind, we think we got a good deal and we also think Eutelsat got a good deal. This deal allows Eutelsat and Viasat to shake hands, and work together in the future.

And I would encourage anyone looking at this deal to see that it will dramatically reduce our risk of entry into the European market, when we get there with ViaSat-3. We can utilize the KA-SAT bandwidth today and integrate it into our larger global network. We are very good at that; we have been doing it for years and have been able to yield a lot more revenue from the two WildBlue satellites than any company could have if it was all they owned.

So coupling the extra KA-SAT capacity with our upcoming ViaSat-3 capacity is extremely exciting for us. ViaSat-3 will have significantly more capacity than competing satellites in the region and more flexibility. We take a very long-term view of this, rather than winning the sprint and believe that an integrated set of assets is a good thing, not a bad thing. If we look at this from a Moore’s Law standpoint, our average cost per bandwidth will be closer to ViaSat-3 than KA-SAT.

VIA SATELLITE: Are you playing catch-up to Eutelsat here, given where it is with its satellites and distribution architecture?

Baldridge: No, not at all. We’ve been highly-successful in the U.S., are making critical gains in Latin America and are now seeing major opportunities in EMEA. From a satellite and ground network perspective, our ViaSat-1 satellite has roughly twice the capacity of KA-SAT, with far more than twice the revenue, our ViaSat-2 satellite was around double our ViaSat-1 capacity and our ViaSat-3 satellite will be roughly 10x the capacity of ViaSat-1. We have continued to change the market for GEO satellites, and we currently do not see any other satellite operator planning to launch a 1,000 Gbps satellite any time soon. We remain committed to innovation, and we’re already designing a ViaSat-4 class satellite that we expect to offer even greater gains in capacity and performance.

Plus, we have developed a set of tools, go-to-market practices, and network management systems that we believe will be directly attributable to our growth in the European broadband market. Our expectation is that this deal enables us to enter Europe — prior to ViaSat-3 — with an ability to execute faster, while being more nimble. 

VIA SATELLITE: It seems weird to talk to a CEO of Viasat not named Mark Dankberg. Tell us a little bit about what it is like to follow an industry legend like Mark?

Baldridge: Mark and I have been working together for a long time, almost 20 years, and I have been extremely happy to be on his team. He is an industry legend.

This management transition is really an evolution for the company. Mark will remain focused on things he wants to work on and that are important to the company, like evaluating best methods for mitigating space debris and our future satellite innovations — all where his interests and strengths are. I get to be hyper-focused on our global execution and building teams.

We will continue to work closely together. We share strategy. We don’t do anything on the operating side that he doesn’t know about, and he has clear discussions with me on the strategic side. I don’t think you will see a lot of difference, other than me being out front a little bit more than previously.

VIA SATELLITE: It is almost a bit of a contradiction to call you the new face of Viasat when you have been working with Mark for almost two decades. Was it any way a shock that you would be taking on this role?

Baldridge: We have talked about a management transition with our board, as we should, and as most companies do, for some time. This change creates a role where Mark can commit to Viasat and the industry for the foreseeable future, remaining the strategic visionary that we at Viasat and the industry recognize him as. This move also ensures I can help the company execute critical operations as we take the company more global with ViaSat-3. We see it as a great natural progression for the company.

VIA SATELLITE: As you go into your first year as the CEO of Viasat, what do you see as the key priorities in the next 12 months? 

Baldridge: There is a lot to do — but let me narrow it down to some my top priorities. First and foremost – we need to continue to execute on getting the ViaSat-3 constellation launched. We are making good progress and we need to continue on this path. Second, we need to have the right talent pool in the regions we plan to expand our service offerings. I am focused on getting the right people in the right markets. This will help us in Europe, Latin America and Africa on the near-term, and farther out, I’m looking at how we can best grow the team in APAC. Third, we must drive toward enhanced customer centricity. We recognize technology can have a strong play into this, and have made enormous advances in using automation, artificial intelligence and machine learning, to intelligently manage our networks, driving deeper understanding of our customers’ needs and leveraging this intelligence to better distribute the capacity around our networks so we are ultimately flexible. Fourth, we have to build distribution globally to meet our diversifying markets.

And finally, we need to ensure safe space. As an industry, we cannot let a single Low-Earth Orbit (LEO) player orchestrate its way into a dominating position where it could end up as a monopoly by destroying a portion of the satellite arc, blocking other players or creating an unsafe space environment by launching unproven, cheap satellites with high failure rates that end up producing unnecessary and dangerous space debris. We are focused on the regulatory activity around this critically-important topic, as well as execution and designing new technologies that are more reliable in the LEO environment. This is an exciting time for us.

VIA SATELLITE: Could you give us an update on the timeline for Viasat-3 launches?

Baldridge: We believe the ViaSat-3 program has gone extremely well. We experienced some slips due to the COVID-19 global pandemic, which we noted in our November 2020 earnings cycle; however, we are talking weeks, so not a long period.

We remain very focused on getting the first ViaSat-3 payload to Boeing. We are currently undergoing rigorous ground testing and to-date, have conducted detailed, integrated testing as well as environmental chamber testing, which have all performed to expectations. We also have satellite access nodes successfully up-and-running over our existing satellite networks.

The ViaSat-3 class of satellites is a very complex satellite system. Following our current testing phase, we will deliver the first ViaSat-3 payload to Boeing so they can execute on their part of the program. We are on schedule to do this. As you know, we are inventing a new type of payload, which for our team, and the market-at-large, is really quite incredible.