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OneWeb merging with Eutelsat?

July 25, 2022

By Chris Forrester

Following weekend reports that British/Indian satellite broadband constellation OneWeb was “near a merger” with Eutelsat, the Paris-based operator has issued a Clarification statement, saying that it had engaged in discussions with its co-shareholders in OneWeb “regarding a potential all-share combination to create a global leader in Connectivity with complementary GEO/LEO activities”.

Eutelsat is already a significant 24 per cent shareholder in OneWeb, which has about two-thirds of its satellites in orbit and is on track to finish launching its constellation during 2023.

The UK has a near-18 per cent stake in OneWeb, now likely to have appreciated in value from its initial $500 million (€490m) to around $600 million.

The reports suggest that Eutelsat will “take over” OneWeb and that there could eventually be a public offering in a new company with a quote on the Paris Euronext bourse. India’s Bharti Group, backed by billionaire Suni Bharti, is another significant investor in OneWeb.

Bloomberg, citing sources “familiar with the matter”, says the intention is to create a pan-European broadband operator to directly compete with Elon Musk’s well-established Starlink satellite service.

Eutelsat is being advised by Rothschild and OneWeb by Barclays, according to the Financial Times.

OneWeb emerged from Chapter 11 bankruptcy in 2020 and with new investment from India’s Bharti Airtel, the UK Government and others including Eutelsat, Japan’s SoftBank, Charlie Ergen-backed Hughes Network Systems, and South Korean technology giant Hanwha. OneWeb also has a significant joint-venture satellite construction business in Florida with Airbus.

Eutelsat was an enthusiastic fan of broadband connectivity by satellite. Its first such dedicated broadband satellite, Ka-Sat, was launched in 2011 and commissioned when Giuliano Berretta was CEO. However, there have been mixed messages more recently and sold 51 per cent of the Ka-Sat business (Euro Broadband Infrastructure/EBI) to rival Viasat for $165.6 million back in 2020.

Under the Viasat agreement, Eutelsat and its subsidiaries continued to provide transitional services to EBI, including the operation of the ground network for Ka-Sat, while EBI will provide service continuity to the Ka-Sat subscriber base of Bigblu Broadband Europe acquired by Eutelsat in September 2020.

Bigblu Broadband was acquired by Eutelsat for £38 million in July 2020, and the Bigblu purchase put an end to the Viasat retail agreement. Viasat continues to deal directly with consumers and business users, and the powerful Viasat-3 MENA satellite which will launch in 2023.

Meanwhile, Eutelsat is readying the launch of its own ‘next’ generation geostationary satellite Eutelsat Konnect VHTS in September.

However, if the agreement/merger with OneWeb happens, it will place the enlarged business in near-direct competition for business clients with SES and its mPOWER O3b service, already well established and with extra satellites coming on stream later this year.

OneWeb is not a ‘direct-to-consumer’ broadband service and instead has relationships with local telcos who retail access to the service.

Other powerful competitors to OneWeb include the aforementioned Elon Musk’s Starlink service with almost 3,000 satellites already in space. Then there’s the Jeff Bezos-backed Project Kuiper with aggressive plans to provide a global broadband service. Canada’s Telesat, albeit with a smaller set of satellites is also moving into the broadband space.

The European Commission, with European Space Agency support, is looking at establishing its own Euro-broadband-by Low Earth Orbit service, but – even if approved – this will be some years yet.

Eutelsat issued a Clarification statement ahead of the stock market opening on July 25th, saying that it had engaged in discussions with its co-shareholders in OneWeb “regarding a potential all-share combination to create a global leader in Connectivity with complementary GEO/LEO activities”.

“The transaction would represent a logical next step in the successful partnership between Eutelsat and OneWeb, started with Eutelsat’s equity investment in OneWeb in April 2021 and deepened with the Global Distribution Agreement announced in March 2022. Eutelsat currently holds 23 per cent of OneWeb’s share capital, alongside a consortium of high-profile public and private investors,” adds Eutelsat.

The satellite operator says that Eutelsat and OneWeb shareholders would each hold 50 per cent of the combined group’s shares.

“The 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,” Eutelsat adds.

“The combined entity would be the first multi-orbit satellite operator offering integrated GEO and LEO solutions and would be uniquely positioned to address a booming ~$16 billion (2030) Satellite Connectivity market. OneWeb is one of the two only global LEO networks and has experienced strong momentum over recent months, with service expected to be fully deployed in 2023.”

“There can be no assurance that these discussions will result in any agreement. Eutelsat will inform the market as soon as soon as there are any new developments,” Eutelsat cautioned.

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