OneWeb: What next for India/UK bid?

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The British government is spending an initial $500 million (€444.9m),to take a reported 45 per cent stake in the consortium which includes Indian giant telco Bharti Global (paying a similar sum for a 45 per cent holding) to acquire bankrupt satellite constellation OneWeb Global Ltd.

The UK has confirmed it will receive a “significant equity share” in the revived business and the bid agreement to buy OneWeb was made in New York on July 2nd.  The UK and Bharti have agreed to fund $1 billion in order to consummate the deal. The remaining 10 per cent unallocated would seemingly go to other creditors.

The UK will also have a controlling ‘golden share’ giving it a say over how the company moves forward and an effective veto over any further sale or merger. There are also rumours out of the Gulf that Abu Dhabi’s sovereign wealth fund could be involved in the UK bid.

However, there remain far more questions than answers on whether this is a sensible strategy for the pair and serious doubts remain as to whether OneWeb can achieve its overall goals.

Generally, the headline newspaper reports have been favourable. For example, The Times newspaper stated that the UK had entered the satellite broadband race against Elon Musk’s SpaceX/Starlink and Jeff Bezos’s Amazon/Project Kuiper.

If only that were true.

Both Musk and Bezos are planning true direct-to-consumer high-speed broadband.  Indeed, Musk will start his services (in limited beta form) later this summer.  OneWeb is different. OneWeb was designed to be ‘direct-to-communities’ in the most remote corners of the planet and in particular the “millions of unconnected schools around the world” (as OneWeb’s promotional video suggests). OneWeb’s founder Greg Wyler has always stressed that this is – or was – OneWeb’s primary and core mission.  Those communities could be remote schools around the world or local administrative offices where there would be a OneWeb ‘hub’ and terminal that would act as a central link to the web.

OneWeb was never originally intended to be a personal direct link from the consumer to the Internet. For a start, the dish-receiving technology is much too expensive. More recently OneWeb has added commercial enterprises, aircraft and maritime operators as part of its target audience.

The UK/Bharti bid is still subject to a US bankruptcy court’s agreement. That should be confirmed in outline by July 10th and the deal’s structure should be in place by year-end although there’s a July 7tth ‘objection date’ in the bankruptcy court’s formal announcement. The bid covers all the OneWeb subsidiaries.

The pair’s name for the bid was ‘Project Lighthouse’ and an acquisition/bid vehicle UK-based Bidco 100 Ltd will also kick in $110 million in cash to the holders of OneWeb’s current secured debts. That cash will go to OneWeb’s original backers including SoftBank, Airbus Group, Qualcomm, the Rwanda government and Banco Azteca.

The $110 million breaks down with Bidco 100 Ltd paying $25 million plus a probable $65 million in funding to OneWeb’s ‘debtor in possession’ status for everyday cash funding. There will be an assumed obligation for a further $45 million already promised to OneWeb from its secured creditors which amounts to the overall $110 million. There will also be obligations to pay the ‘winding down’ elements of the (current) company to the tune of some $3 million.

Documents filed alongside the bid specify up to $740 million in additional funding to the project by means of debt or equity. Top of the list is the cost of launching the balance of the OneWeb fleet at some €280 million or so.

The new business will get all the newly issued common stock of the reorganised OneWeb business. The winning bidders are also committed to use their “reasonable best efforts” to renegotiate previous contracts between OneWeb and its key suppliers and sub-contractors.

However, this is just the start of the likely costs in the consortium being the sole bidder in the auction of OneWeb’s assets. The core problem remains: OneWeb has already burned through $3.4 billion in equity and debt and has launched just 74 low-orbiting satellites – and many billions more will need to be spent to achieve what might be quite diverse roles between the various consortium members. Indeed, it is generally accepted that the overall cost to build and launch the initial 650 satellites will easily cost some $3-$5 billion, and it looks like being far, far more.

OneWeb, as its bankruptcy documents state, owed SoftBank some $913 million, for example.

OneWeb’s original FCC filings require it to orbit about 650 satellites to provide global broadband coverage. But the UK’s demand is for a replacement for the European Galileo global positioning system. Galileo is still good for everyday consumer use in the UK, but the military element will no longer be usable by security services and military.

There are also questions over whether UK aircraft can access Galileo’s European Aviation Network (EAN, developed by London-based Inmarsat and Deutsche Telekom). The EAN initiative is good for land and sea satellite coverage for “all 28 EU States plus Norway and Switzerland”. On December 31st the UK withdraws from the EU.

Either way, the existing design of the OneWeb craft will need modification and possibly delay the widespread introduction of the constellation. The Galileo replacement element will need L-band frequencies, for example, and the UK has previously said that its Galileo alternative will be extra-robust and of military grade and protected against potential hacking or interference.

L-band technology for GPS/Galileo users is simple in that an omnidirectional antenna is inexpensive and the technology easily available. However, the satellite expense when L-band is included is much greater and requires ultra-dependable atomic clocks in each craft for total accuracy on the ground.

OneWeb’s existing satellites use Ku-band frequencies in the 12-18 GHz which are very directional and thus need a much less sophisticated – and costly – receive antenna.

The UK’s bill for building a rival to the Galileo system has always been mooted at about £5 billion, and Mark Garnier MP and vice-chairman of the UK’s all-party parliamentary group on space, is backing the OneWeb purchase. “We have spent some £90 million looking at our own alternative — GNSS — but have concluded that it will be too ambitious. Costs of £5 billion concentrate the mind,” he said.

There might be a solution already in OneWeb’s ‘old contracts’ file. Back in September 2019, OneWeb and Iridium Communications signed an MoU to “work together” to provide a combined offering of a potential combination of services and even dual-band receivers. Iridium operates in L-band. “[These] could create a complementary, full-service option for applications such as heads of state communications, critical tactical services, maritime, disaster response and more,” said a joint statement at the time.

Meanwhile Bharti’s involvement is crucial and probably key to the overall success of the OneWeb scheme. Bharti was an initial backer in pre-bankruptcy OneWeb and knows better than many the potential for its broadband connectivity over Southern Asia including India and Bangladesh and especially Africa.

Bharti has some 400 million telco subscribers and 16 million TV subscribers to its Bharti Airtel DTH system. Bharti has intimated that it will contract with ‘New’ OneWeb for fresh business thus guaranteeing some income to the new company.

And OneWeb’s ambitions extend well beyond the initial 650 craft. Barely six weeks ago the company – despite its bankruptcy position – applied to the FCC to increase the number of satellites in its scheme to 48,000 at a number of orbital heights.

The consortium also seems intent on shifting production of its satellites from Florida to the UK. Key to this aspect is the role of Airbus, which was in a 50/50 joint venture with OneWeb in the Florida factory. That aim might well suffer from US restrictions on ‘exporting’ the factory to the UK, and time might well be lost in achieving the move.

UK Business Secretary Alok Sharma said on July 3rd: “This deal underlines the scale of Britain’s ambitions on the global stage. Our access to a global fleet of satellites has the potential to connect millions of people worldwide to broadband, many for the first time, and the deal presents the opportunity to further develop our strong advanced manufacturing base right here in the UK.”

But not everyone is quite as enthusiastic. “The fundamental starting point is, yes, we’ve bought the wrong satellites,” said Dr Bleddyn Bowen, a space policy expert at the University of Leicester speaking to The Guardian newspaper. “OneWeb is working on basically the same idea as Elon Musk’s Starlink; a mega-constellation of satellites in Low Earth Orbit, which are used to connect people on the ground to the Internet. What’s happened is that the very talented lobbyists at OneWeb have convinced the government that we can completely redesign some of the satellites to piggyback a navigation payload on it. It’s bolting an unproven technology on to a mega-constellation that’s designed to do something else. It’s a tech and business gamble,” added Bowen.

Giles Thorne, a research analyst at investment bank Jefferies, and a well-regarded voice in satellite matters, was blunt, saying: “This situation is nonsensical to me. This situation looks like nationalism trumping solid industrial policy. Let’s give the government the benefit of the doubt: if the output the government wants is a UK-branded positioning system, a projection of UK power around the world and supporting the UK satellite industry base, then it is probably quicker and cheaper to smash the square peg of OneWeb into the round hole of a Galileo replacement than it is to do it from scratch.”

Sami Kassab, satellite equity analyst at investment bank Exane/BNPP is not exactly convinced of the merits of the new plan or its longer-term prospects. He says: “This deal values OneWeb equity at $1 billion at a time when SES’s ex-C-band equity value is around $300 million. OneWeb has no revenues. SES has an attractive low latency offering with O3b and mPower and close to €2 billion of [overall] revenues. The valuation discrepancy is noteworthy and perhaps explains why Canadian, Chinese and French satellite operators apparently refused to participate at the auction on July 2.”

He adds: “The full deployment of OneWeb’s constellation will add more capacity and a new entrant to the market. As such it is a negative for incumbent satellite players. However, the involvement of a mobile telco network operator (the third largest with 425m subscribers) could suggest that new space assets have become attractive for the telco industry. SES Networks is new space, has 9 consecutive quarters of revenue growth and is currently valued at a fraction of what Bharti paid for OneWeb. We remain [positive] on SES and [equal weight] on Eutelsat.”


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