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Eutelsat hammered by investors

July 25, 2022

By Chris Forrester

Eutelsat’s share price has collapsed upon news that it was considering a 50/50 merger with OneWeb. Within one hour of the Paris bourse opening, Eutelsat’s share price had fallen almost 19 per cent with 1.65 million shares changing hands and shares dropping from €10.43 to just €8.44.

Shareholders seem significantly nervous about the proposed merger with OneWeb and the terms of the transaction being discussed, which would see Eutelsat and OneWeb shareholders each hold 50 per cent of the combined group’s shares.

Eutelsat says the proposed transaction would be structured as a contribution by OneWeb’s shareholders of their stake in OneWeb to Eutelsat in exchange for newly issued Eutelsat shares. Any combination would be subject to, among other conditions, approval by the requisite majority of Eutelsat shareholders and receipt of all relevant antitrust and regulatory (including foreign investment) approvals.

The proposals say there would be an increase in Eutelsat’s issued shares, thus potentially harming existing value in return for a stake in OneWeb that currently is barely operating any commercial services and with next to zero track record other than its March 2020 Chapter 11 bankruptcy from which it emerged in November 2020.

Eutelsat has already invested more than $700 million for a 22.9 per cent stake in OneWeb. India’s Bharti Global has a 30 per cent stake.

Another concern is the need for more capital for OneWeb. The would-be constellation operator already has some two-thirds of its fleet in orbit, but has been badly hit by Russia’s confiscation of 36 of its satellites (now assumed to be still sitting at the planned launch site in Baikonur, Kazakhstan) and further unanticipated costs forced upon it by having to buy launches on SpaceX rockets and from New Space India.

The original plan for OneWeb was to have a full broadband service up and running by the end of this year. That date has slipped into the second-half of 2023 according to OneWeb.

The rumour-mill this past weekend said that Bharti’s Sunil Mittal, already chairman of Bharti, would be chairman of the combined Eutelsat/OneWeb operation. However, reports suggest that Mittal is “no longer as excited as he was” about OneWeb.

A merger would need shareholder approval and while – one assumes – Eutelsat’s shareholders would have been consulted, that rubber stamping could now be in doubt.

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