What Space42 merger between Bayanat and Yahsat would mean for UAE
Ahead of a shareholder vote that would solidify the creation of an AI-powered space technology company, Space42, its managing director said the company would help make the UAE a leader in the global space industry. “We are well on the way to complete the main activities for executing the merger,” said Karim Sabbagh, referring to a meeting on April 25 where shareholders will vote on the proposed merger. “We’re on track,” he added. Mr Sabbagh said that additional regulatory steps were being taken on an international level to ensure a successful merger. “We rely on some western technologies, so when you transfer ownership of these technologies from one entity to another, you have to go through a certain process, but all is unfolding as planned,” he explained. Space42 would result from the proposed merger, announced in December last year, between two Abu Dhabi companies, Bayanat, a geospatial data products and services provider, and satellite services company Al Yah Satellite Communications, better known as Yahsat. Until the merger is approved by shareholders, both Bayanat and Yahsat will continue to operate independently. If approved, the shareholders of Bayanat and Yahsat will own 54 per cent and 46 per cent, respectively, of Space42. According to a circular released by both companies in March announcing the merger vote, Bayanat and Yahsat have a combined revenue $700 million, (Dh2.8 billion) and a net income of $173 million (Dh637 million) for 2023. “The merger would create one of the most valuable publicly listed space companies in the world with additional potential for significant global growth and synergies,” read the circular. A new report from the World Economic Forum indicates that the global space economy could be worth $1.8 trillion by 2035, up from $630 billion in 2023, almost twice the rate of global GDP growth. Jay Zagorsky, a professor of markets, public policy and law at Boston University's Questrom School of Business, tempered some of the overall estimates from WEF's report. “I believe the figure is overestimating the true impact space will have here on Earth in the next 10 years or so,” he said. “First, the cost of sending people and equipment into outer space is plummeting,” he explained. “If costs come down faster than usage goes up, then the size of the space economy will not expand as rapidly as the World Economic Forum estimates.” Mr Zagorsky also noted that the WEF's report does not take into consideration inflation. He said a merger between Bayanat and Yahsat made strategic sense, given Bayanat's ability to analyse data and Yahsat's strong satellite services. However, he cautioned that some risks apply to all mergers, such as differences in corporate culture or strategies that sometimes create friction. “In general, mergers can fail because the companies turn out to be incompatible,” he added. “Workers at different companies might have different cultures, attitudes toward risk and work styles.” Mr Zagorsky said despite potential risks, the excitement about the merger spoke volumes about the optimism surrounding the space economy. “I wish it [the merger] much success … the more companies and nations focusing on space, the better,” he said. “The UAE's Mars 2117 project will need many partners to put a settlement on Mars within 100 years. Hopefully, this merger is successful so that the new company can provide some of the resources to make a Mars colony a reality.” Anna Hazlett, founder of AzurX, a UAE-based space strategy and investment firm, echoed Mr Zagorsky's sentiments and said the proposed merger could lay the groundwork for regional innovation. “It's significant not only for the UAE and the Arab Gulf region, as well as the global space sector,” she said. “Bayanat's expertise in developing AI and machine learning capabilities for the space sector has the potential to turbocharge Yahsat's satellite communications and nascent Earth observation fleet and services,” she explained. Ms Hazlett said a potential combination of resources between the two companies reinforces her overall bullish outlook on the space sector. “From my point of view, it's a limitless place of advancement, growth and wealth potential,” she added. “By understanding and embracing the full potential of space, public and private industry players can position themselves as leaders in the space economy, unlocking long-term benefits,” said Ryan Brukardt, a senior partner of McKinsey & Company, in reference to the WEF report on the space economy. Mr Sabbagh said the merger would eventually give the UAE greater technological sovereignty, comparing it to the infrastructure that currently exists in the US. “There's an ecosystem of space-related companies … whether it's on the West Coast or Texas, you have a cluster. You know company X can help you with a chip set and company Y can help you with solar panels, you want to be able to replicate this,” he explained, noting the power and economic importance of Silicon Valley in California, and the “Silicon Prairie” of Texas. At the time of the merger announcement in December, Space42 was described as a new AI-powered space technology company that would have global reach. “That is the main idea,” Mr Sabbagh said, referring to how artificial intelligence would add value to Space42's offerings. “AI can have a remarkable impact on anything that deals with optimising your network operation and management,” he said, explaining that assets in space often require sophisticated capabilities. “From Earth, because of latency, you can't control those assets on a second-by second basis … increasingly you're going to require network systems that have significant autonomous capabilities,” he added. Mr Sabbagh said the proposed merger could also give Space42 an advantage in terms of offering superior technology for space asset maintenance. “Once you send your assets in space there's not much on Earth you can do physically to deal with it,” he said. “The more you have the ability to predict how these systems are performing, and the more proactive you are about this, the less likely you'll have disruption of the service.” Mr Sabbagh said Bayanat and Yahsat can work in tandem using their combined geospatial technology, the ability to gather information about the Earth's surface, and satellite communication capabilities to detect weather-related events such as sandstorms. “You want to explain where the sandstorm emerged, what was the root cause of the sandstorm, and can we have a predictive model to help us understand these events going forward,” he said. “You want to make sure the services you deliver down on Earth are far more efficient and insightful,” he said. At its core, Mr Sabbagh said Space42's business model will revolve around the ability to deliver services on a continuous basis for different uses. For the end user, Adnoc, E&, civil defence, armed forces, the air force, they expect from us a service that meets the quality standards and mission requirements that they have,” he said. The continuity of AI-infused geospatial and satellite communication services, according to Mr Sabbagh, will be complemented by Space42's ability to provide sovereign control over technology. “In a worst-case scenario, can we continue to provide that service to the country, do we continue to have control over the technology? The answer is yes,” he said, alluding to the UAE's overall national strategy. Bayanat and Yahsat both saw revenue growth and profitability in 2023, and Mr Sabbah said Space42 aims to grow the business at a double-digit rate. In 2023, Bayanat's revenue grew by 47 per cent, while Yahsat's revenue grew by 6 per cent. “The satellite communication industry tends to be very profitable but very stable, and the geospatial intelligence industry tends to be high-growth but subscale, so by bringing these two industries together we're bringing significant growth on an aggregate business. “But equally important is our ability to drive significant efficiencies by bringing these two operations together,” he said, stressing the importance of unifying the capabilities of both companies. “Bayanat and Yahsat are two great companies that are successful in their own rights,” Mr Sabbagh said. Together, they could help the UAE act as a space innovation sandbox, eventually scaling space technology regionally and globally.
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