Viasat To Purchase Wildblue For $568 Million

The move will allow the two companies to reduce long-term costs and risk

, as they seek to expand their position in the consumer broadband satellite Internet market.

The ViaSat SurfBeam networking system, which pioneered the use of unprocessed Ka-band spot beam technology to provide increased capacity and lower the cost of bandwidth, currently powers WildBlue. ViaSat has plans to launch ViaSat1 a new higher-capacity satellite in the first quarter of 2011, which will enable WildBlue to run at speeds between 2-8 Megabits per second, similar to the speeds cable companies provide their customers. The increase in speed apparently will not be accompanied by a rate increase, as ViaSat plans to keep WildBlue service prices at their current levels, ranging from $39.95 to $79.95. Currently WildBlue speeds reach 1.5 Mbps and start at 512 Kbps.

At the moment WildBlue has roughly 400,000 customers, with 90% of that total having just dial-up Internet service as their only alternative. The increase in speed will allow WildBlue to compete in DSL and Cable markets as well.

The deal is expected to close in early April, subject to regulatory clearance and other conditions. The final transaction will consist of $443 million in cash and another $125 million in newly issued ViaSat stock shares. Based on how the Street has embraced this deal the stock may come out to be even more valuable than first anticipated. ViaSat shares rose sharply to a new 52-week high at $28.34 per share.

One challenge for WildBlue has been a lack of capacity to meet the demand for their service.

The merger should alleviate this problem and accelerate WildBlues already robust growth. Great news for customers in rural areas where dialup is the only other option and better news for customers that have DSL and/or cable available for Internet, the advent of another player in those markets can only

by: Frank Bilotta

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