January 31, 2023

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Satellite firms Eutelsat and OneWeb aim to combine operations

[Source: BBC News]

OneWeb, the London-based satellite company rescued from bankruptcy in part by the British government, is to merge with Paris-headquartered Eutelsat.

The French company already had a 23% share in the UK business.

The operators say the joint mission will give both partners a better chance to realise the business opportunities that are coming.

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OneWeb is building a low-Earth orbit constellation to provide internet broadband connections across the globe.

Eutelsat operates 30-times higher in the sky in what’s termed Geostationary Orbit, at 36,000km in altitude. It is one of the biggest distributors in the world of direct-to-home TV.

“This transaction will deliver a unique capability across the satellite industry through a fully integrated GEO/LEO offering,” said Eutelsat chief executive Eva Berneke.

“It will provide customers with a one-stop-shop of satellite connectivity. Our new business will be uniquely positioned in the fast-growing connectivity market. This is estimated at about €16bn (£13.6bn) by 2030.”

The union has been described as a “merger of equals”, although in terms of pedigree, Eutelsat has a much longer heritage, having originally started as a pan-European intergovernmental organisation 45 years ago.

OneWeb, in contrast, has spent recent years in start-up territory.

The transaction is to be structured as an exchange of OneWeb shares by its shareholders (other than Eutelsat) with new shares issued by Eutelsat, such that, at closing, Eutelsat would own 100% of OneWeb (bar a “golden share” held by the UK government).

OneWeb shareholders would receive 230 million newly issued Eutelsat shares representing 50% of the enlarged share capital.

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The companies will keep their names for their side of the joint business, and also their respective headquarters in the French and UK capitals.

The goal is to have listings on both Paris and London stock markets.

The deal requires regulatory approval, but if everything works out, the transaction should complete in early 2023.

Commentators say the merger makes sense for both parties.

For Eutelsat, it has been working for some time to diversify away from its traditional video markets which are largely flat, and to get into more broader connectivity sectors that have better growth potential – for example, connecting planes, ships, and remote or mobile customers.

For OneWeb, it will benefit from having the cash-raising potential of its elder sibling. The London outfit will need money to continually update and expand its LEO constellation.

For its first generation, it’s aiming for 650 satellites for global coverage, but ultimately, in later iterations, it will endeavour to get to 7,000.

“Two-thirds of the (Generation One) fleet is already deployed. And right now most of the satellites required to complete the constellation are actually manufactured,” explained OneWeb chief executive Neil Masterson.

“Gen One is fully-funded; we’ve already raised €6.3bn. And Gen Two, which is under assessment right now, will provide much more capacity at a much-reduced cost.”

OneWeb has been frustrated in its efforts to roll out the Gen One satellites following its loss of access to Russian Soyuz rockets.

When the West imposed sanctions on Russia for its invasion of Ukraine, Moscow withdrew the Soyuz vehicles from the market, leaving OneWeb scrabbling for alternative rides.

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It’s now contracted several launch providers, with the most significant being California’s SpaceX company which happens to be building its own broadband constellation, Starlink.

The UK government invested $500m (€490m; £420m) in OneWeb to pull it out of bankruptcy in 2020.

Its golden share gives it certain vetoes on what happens to the company, but like all present shareholders in OneWeb, it approved the merger with Eutelsat.