Bank: Eutelsat investment in OneWeb at risk

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The ramifications from Eutelsat’s 24 per cent participation in OneWeb, and whether that stake will forbid the satellite operator from participating in a future EU-backed Low Earth orbiting broadband system, continue.

May 25th saw further anxieties emerge over Eutelsat’s role as investors absorbed the possible impact of the EU’s news. One report says that Eutelsat’s proposed 24 per cent stake – and which will cost $550 million – in OneWeb might now be at risk.

Thierry Breton, the EU commissioner in charge of the Internal Market and the EU’s space policy issued negative comments (“incompatible”) on Eutelsat’s decision to take a stake in OneWeb. As reported in the FT and French Media, he stated: “I do not see how, structurally, an entity can have stakes in two competing projects”. He also argued that the EU was investigating whether the OneWeb investment violated the terms of a contract Eutelsat won last year to study the feasibility of a EU-funded LEO constellation.

The news also prompted a report from investment bank Exane/BNPP and its satellite analyst Sami Kassab, who said: “The satellite industry is entering the age of mega constellations. Until recently, Eutelsat had prioritised balance sheet protection over questionable investments in building its own non-geostationary constellations. We believe this means that around one third of the group’s revenues are at a competitive disadvantage as it lacks low latency, high throughput satellites. A few weeks ago, Eutelsat announced it was addressing this issue as it is acquiring a 24 percent stake in OneWeb, a leading LEO constellation.”

The bank’s note to clients continued: “Last year, the EU announced that it was exploring the creation of a EUR6bn tax-payer funded European LEO constellation. Eutelsat, SES, Hispasat, Thales, Airbus and others were given a contract to explore the feasibility of such a project. First, Thierry Breton is now exploring whether Eutelsat may have breached this contract. Eutelsat claims both projects are complimentary. This is a minor issue in our view.”

“Secondly,” adds the bank. “The role of Eutelsat in a potential new EU LEO constellation could now be somewhat compromised due to its involvement in OneWeb. We also note that President Macron had issued positive statements with regards to the EU LEO constellation project. Given the politics involved in satellites (national sovereignty, Brexit), we believe it is also questionable whether Eutelsat will be allowed to close the OneWeb investment.”

“Thirdly, we wonder to what extend Eutelsat’s decision to go with OneWeb might actually reflecting internal issues with the EU LEO project (ie. role of SES mPower, role of Thales and its LEO spectrum rights, Airbus’ 50 per cent ownership in OneWeb’s satellite manufacturing joint-venture),” says the bank.

The French state owns a large slice of Eutelsat (BpiFrance Participations SA, with ownership at 20 per cent. The second-largest shareholding is from Fonds Stratégique de Participation (FSP) at 7.5 per cent.


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