Advanced Television

SoftBank drives Intelsat, OneWeb merger

February 28, 2017

By Chris Forrester

Japan’s telco giant SoftBank is the catalyst in bringing together old-established Intelsat and embryonic satellite operator OneWeb, into a merger.

In essence, the agreement sees SoftBank inject $1.7 billion (€1.6bn) of new equity into debt-heavy Intelsat. At the end of 2016, SoftBank invested $1 billion into Jersey, Channel Islands-based OneWeb. Intelsat was already a minor investor in OneWeb.

“The debt exchange offers, announced today, together with the proceeds of the SoftBank investment are intended to reduce Intelsat’s debt by approximately $3.6 billion, assuming the minimum level of participation in the debt exchange offers is achieved. Either party can terminate the agreement and SoftBank can terminate its investment if the debt exchange offers have not been successfully completed within 90 days of the date of the agreement,” said a joint statement.

Stephen Spengler, CEO at Intelsat, said, “We believe that combining Intelsat with OneWeb will create an industry leader unique in its ability to provide affordable broadband anywhere in the world. As an early equity investor in OneWeb, we recognized a network that was a complement to our next-generation Intelsat EpicNG  fleet and a fit with our long-term strategy. By merging OneWeb’s LEO satellite constellation and innovative technology with our global scale, terrestrial infrastructure and GEO satellite network, we will create advanced solutions that address the need for ubiquitous broadband. The transaction, including SoftBank’s investment, will significantly strengthen Intelsat’s capital structure and accelerate our ability to unlock new applications, such as connected vehicles, as well as advanced services for our existing customers in the enterprise, wireless infrastructure, mobility, media and government sectors, while also reducing execution and other risks.”

Greg Wyler, Founder and Executive Chairman of OneWeb, said: “OneWeb has made incredible technical progress over the past year, and has itself attracted significant investment from SoftBank. With SoftBank’s support we will build the world’s first truly global broadband company, accelerating our mission of bridging the digital divide by connecting the four billion people without access today. While there are numerous growth paths available to OneWeb, we are very excited at the prospect of working with Intelsat on this shared objective.”

Masayoshi Son, Chairman/CEO of SoftBank, said: “We are in the midst of a technological revolution and, provided we receive the necessary cooperation from Intelsat bondholders, we welcome the opportunity to support OneWeb as it creates the foundation for next-generation global internet services anywhere on the planet. This combination is consistent with SoftBank’s strategy of investing in disruptive, foundational technologies that are building the infrastructure for tomorrow, and this proposal offers a win-win opportunity to accelerate OneWeb’s mission while enhancing the Intelsat balance sheet.”

Intelsat also confirmed its Q4 and full-year results on February 28th.  Q4 revenues were $550.7 million. Full-year 2016 revenues were $2.188 billion. Contracted backlog was $8.7 billion.

Before the deal was confirmed, investment bank Exane/BNP-Paribas said such a move would alleviate balance sheet pressure on Intelsat and improve the competitiveness of Intelsat-OneWeb in the Data, Mobility and Government business. “The competitive benefits of the Intelsat-OneWeb merger might be strongest in the Data and Government business where OneWeb innovative technology might generate lower price points and a competitive edge. On the other hand, the Trump administration plans for a $54 billion increase in the US defense budget (the highest in a decade) might prove a more important driving force for Eutelsat and SES government businesses if actually enacted.”

The bank also asks: “We also question the appeal of such merger from the OneWeb side. While benefits for a troubled Intelsat are clear, the benefits of this merger for OneWeb are less straightforward. OneWeb claims to be the disruptor in the Space economy with an innovative technology. So the need to merge with yesterday’s leader [Intelsat] is unclear.”


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