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Analyst: “Eutelsat+OneWeb makes strategic sense”

July 25, 2022

A flash note to investors from investment bank Exane/BNPP and analyst Sami Kassab says that the much rumoured Eutelsat/OneWeb ‘merger’ would make strong strategic sense as it would constitute the first LEO+GEO broadband satellite network in the world. “We believe that multi-orbit systems offer a sustainable competitive advantage as they offer the most attractive bandwidth economics,” says the bank.

If the news is confirmed, then it likely puts an end to a much-discussed ‘merger’ between Eutelsat and Luxembourg’s SES.

“Latency sensitive traffic can be routed to the expensive LEO layer while applications that are not sensitive (ie video streaming) can be routed towards less costly GEO systems. Apart from SES and its MEO-GEO network, Eutelsat would be the only company with such an offering. Elon Musk’s Starlink and Jeff Bezos’ Kuiper lack this multi-orbit architecture…for now. Note that we also understand that OneWeb owns priority spectrum rights over SpaceX’s Starlink and Bezos’ Kuiper systems; a further competitive advantage,” says Kassab.

“From a financial point of view, we expect this merger to help Eutelsat return to positive revenue growth and to generate some operational cost savings. However, this merger could also lead Eutelsat to launch a capital increase in the medium term in order to raise funds required to finance the estimated €3-5 billion of OneWeb upcoming Generation 2 satellite network,” cautions the bank.

“We note that OneWeb had strong commercial momentum last year, but that the deployment of its constellation has been significantly impacted by the war in Ukraine. Entry into service is likely to be delayed by 6-12 months versus the mid-22 initial target date, in our view,” adds Exane/BNPP.

The bank suggests that this potential combination suggests a takeover of Eutelsat or merger with SES is a much less like scenario in the short to medium term. “We also would consider this Eutelsat+OneWeb merger in the context of the new European space policy and argue that the takeover of OneWeb by Eutelsat is likely to alleviate concerns by the EU Commission on using this existing LEO system in its upcoming broadband satellite constellation. In other words, we believe that the EU Commission could end up procuring reserved capacity from Eutelsat/OneWeb for its GEO and LEO systems and from SES for its GEO and MEO layer.”

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