UK-registered satellite broadband company OneWeb, part-owned by the UK government, is set to sign a merger agreement with existing investor and rival French operator Eutelsat. But the UK is said to have won a number of concessions to help protect its strategic investment.
So far, OneWeb has already managed to launch 428 of their small c.150kg Low earth orbit (LEO) based ultrafast (100Mbps+) and low latency (less than 100ms) satellites in space – orbiting at an altitude of around 1,200 km – and their initial plan is to build a constellation of 648 (588 are needed for coverage – the rest are for redundancy), which is sufficient for a reasonable level of overall coverage.
The company has also approved a total of 2,000 satellites (though it’s looking to go beyond that) and 1,280 of those will be a second-gen model that could sit in a higher tier. Mean Earth Orbit (MEO) of 8,500 km, which should largely introduce improved navigation and positioning features. The UK government is very keen on this due to the post-Brexit loss of full access to the EU’s Galileo system. But we won’t see the first untested MEO satellites until 2024-25.
However, the launches of new LEO satellites have recently suffered a big delay due to the war in Ukraine (here), but they should resume via new launch partners before the end of this year (SpaceX and New Space India Limited, etc. .) . Nonetheless, OneWeb will still need a lot more investment to realize its future plans and stay competitive with rivals like Starlink (SpaceX), where the new deal with Eutelsat could come into play (they already own a 24% stake).
Currently, the main shareholders of OneWeb are Bharti Global, Eutelsat, the UK government ($500 million), SoftBank, Hughes and Hanwha. But the weekend reports (FT, Guardian etc.) indicated that Eutelsat, which is partly backed by investments from the French and Chinese governments (20% and 5% respectively), is about to sign a major merger agreement with OneWeb.
Naturally, this poses a politically sensitive issue for the UK government, which alongside Bharti helped rescue OneWeb from bankruptcy in 2020 and still owns a preferred stake in the company. But such a deal could not go forward without government approval, and they would have negotiated some key concessions (this largely retains their existing rights).
Concessions reported in UK for OneWeb merger
➤ The UK will retain a veto over sales of services that could pose a risk to UK national security.
➤ A veto on any decision to move OneWeb’s headquarters out of the UK.
➤ The UK will hold first preference rights to supply chain, manufacturing and launch opportunities that may be covered by UK companies.
➤ The shares will be listed on the London Stock Exchange (LSE) in a secondary listing in the near future.
All of the above points are critical to the government, especially given their longstanding drive to implement navigation and positioning functionality in the mega constellation, as well as any plans to move the manufacturing base. future satellites from the United States to the United Kingdom (here). But as above, it’s a long process, and they’re only just beginning design work on future satellites, with manufacturing not expected to follow until 2024-25.
On the other hand, Eutelsat will benefit from faster access to the relatively new market of LEO-based communications satellites, which will be able to complement their existing fleet of larger satellites in high geostationary Earth orbit. Latest news from Eutelsat Very high speed satellite (VHTS) is due to launch in September (here).
Reports over the weekend claim a deal could be signed as soon as today, and we’ll update this article accordingly, if that happens.
UPDATE 1:18 p.m.
Eutelsat has just confirmed the talks, if not an agreement.
Following recent market rumours, Eutelsat Communications (Euronext Paris: ETL) confirms that it has entered into discussions with its co-shareholders of OneWeb regarding a possible equity combination to create a world leader in Connectivity with complementary GEO/LEO activities.
The combined entity would be the first multi-orbit satellite operator to offer integrated GEO and LEO solutions and would be uniquely positioned to serve a growing satellite connectivity market of approximately $16 billion (2030). OneWeb is one of only two global LEO networks and has seen strong momentum in recent months, with the service expected to be fully rolled out in 2023.
The transaction would represent a logical continuation in the successful partnership between Eutelsat and OneWeb, which began with Eutelsat’s stake in OneWeb in April 2021 and deepened with the global distribution agreement announced in March 2022. Eutelsat currently holds 23% of the capital of OneWeb, alongside a consortium of leading public and private investors.
Under the terms of the transaction being discussed, shareholders of Eutelsat and OneWeb would each hold 50% of the shares of the combined group.
The transaction would be structured as a contribution by OneWeb shareholders of their stake in OneWeb to Eutelsat in exchange for newly issued Eutelsat shares. Any combination would be subject to, among other conditions, the approval of the required majority of Eutelsat shareholders and the receipt of all relevant antitrust and regulatory (including foreign investment) approvals.
There is no guarantee that these discussions will lead to an agreement. Eutelsat will inform the market as soon as there are new developments.
UPDATE July 26, 2022 at 7:19 a.m.
Eutelsat and the main shareholders of OneWeb confirmed this morning that they have signed a memorandum of understanding (MoU) to combine Eutelsat and OneWeb in an all-share transaction. Under the agreement, Eutelsat shareholders and OneWeb shareholders would each hold 50% of Eutelsat shares. The transaction values OneWeb at 3.4 billion dollars, or a value of 12 euros per Eutelsat share (including the dividend, before synergies).
As planned, Eutelsat will continue to be listed on Euronext Paris and will apply for admission to standard listing on the London Stock Exchange. Trading under its current name, OneWeb will also continue to operate the LEO business, with OneWeb’s head office remaining in the UK.
The British government will sell its ‘share of gold“and the agreement has been structured to reaffirm Eutelsat’s commitment to supporting the UK”while strengthening our presence as an international company.” Eutelsat would own 100% of OneWeb (excluding the UK government’s “special share”).
The transaction, subject to the approval of the usual meetings and regulatory authorities, should be finalized by the end of the first half of 2023.
Dominique D’Hinnin, Chairman of Eutelsat, said:
“I am delighted to announce this significant new step in the collaboration between Eutelsat and OneWeb. The combination of our two businesses will provide a world first, combining LEO constellations and GEO assets to seize the opportunity for significant growth in connectivity and provide our customers with solutions that meet their needs in an even wider range of applications. . This combination will accelerate the commercialization of OneWeb’s fleet, while reinforcing the attractiveness of Eutelsat’s growth profile.
In addition, the combination harbors significant potential for value creation, anchored on a balanced mix of revenue, cost and investment synergies. The strong support from strategic shareholders on both sides speaks to the tremendous opportunity this combination offers and the value that will be created for all of its stakeholders. This is truly a game-changer for our industry. »
Neil Masterson, CEO of OneWeb, said:
“Just 20 months ago, OneWeb resumed its mission to connect the unconnected and break down the connectivity barriers that hold back many underserved economies and communities around the world. Since then, we have made that vision a reality and have become the second largest operator of low Earth orbit satellites in the world.
Today’s announcement is another bold step in OneWeb’s remarkable journey. This is a testament to the resilience, execution and innovation of our teams, the strong demand we have seen since launching our business services, and the close collaboration we have forged with our partners to deliver a High-speed, low-latency connectivity to governments, businesses, and communities.
This combination accelerates our mission to provide connectivity that will change lives at scale and create a fast-growing, well-funded company that will continue to create significant value for our shareholders.
This decision gives OneWeb the support it needs to continue its future development, while ensuring that the UK’s strategic priorities are maintained. Another benefit is that even if the government suddenly decided to pull out of OneWeb tomorrow, it would still have made money on its bet. But at present, OneWeb and its future browsing technologies remain too big for the UK government to offload.