Eutelsat and OneWeb to join forces across orbits in $3.4b merger

LEO and GEO orbit covered in satellite broadband handshake

OneWeb and Eutelsat have signed a memorandum of understanding intended to create a mega multi-orbit satellite broadband provider.

Unlike rival Starlink, which has thousands of satellites in Low Earth Orbit (LEO), the combined company would operate satellites both in Geostationary Orbit (GEO) via the Eutelsat's 36-strong fleet and LEO – via OneWeb's constellation, which currently stands at 428 satellites.

There are pros and cons to satellite locations: a GEO satellite has better coverage over a specific region while LEO satellites carry the promise of lower latency and are generally cheaper to build and launch, although more are needed. Combining the two should, in theory, deliver a best-of-both-worlds system depending on the challenges of integration and customer requirements.

As for how the deal will work, the transaction values OneWeb at $3.4 billion (implying a value of €12 per Eutelsat share) and Eutelsat shareholders and OneWeb shareholders would each hold 50 percent of Eutelsat shares. Effectively, Eutelsat ends up owning 100 percent of OneWeb (excluding the UK government's share.)

The UK government's stake is significant, since £500 million (c $600 million) of UK taxpayer cash was spent on OneWeb two years ago.

Eutelsat itself has also invested heavily in OneWeb, and made an initial investment of $550 million in April 2021, and then spent another $165 million in October last year, taking its shareholding from 17.6 percent to 22.9 percent [PDF].

The UK's Department for Business, Energy & Industrial Strategy said: "The UK government will retain the special share and its exclusive rights over OneWeb – securing the company's future at the centre of the combined group's global LEO business, national security controls over the network, and first-preference rights over domestic industrial opportunities."

The latter point is significant. As well as national security needs, the UK is to be the "preferred" location for launches as well as procurement for commercial manufacturing. Unfortunately for UK businesses, this also means that the country will be competing against other states for OneWeb work, "as usual for major European space projects," observed Dr Bleddyn Bowen, Associate Professor in International Relations at the University of Leicester.

The merger, which is expected to be complete by the first half of 2023 (subject to regulatory approvals and a nod from Eutelsat's shareholders), is expected to generate combined revenues of €1.2 billion (c $1.22 billion). While OneWeb will continue to operate the LEO business and remain headquartered in the UK, France-based Eutelsat will continue to be listed on Euronext Paris and apply for admission to London Stock Exchange.

And who knows, by the time that 2023 completion rolls around, OneWeb might finally have got some more of its proposed constellation off the ground. The last batch of satellites never left Baikonur after Russia's invasion of Ukraine, and OneWeb has since signed up several alternative launch operators, including SpaceX, to launch the remainder of its satellites.

That's assuming SpaceX can find time in between launches to build the Starlink satellite constellation. The company launched another 53 of the satellites into orbit on July 24, SpaceX's sixth mission of the month. ®

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