The deal will ease any cashflow issues that OneWeb had. It originally planned to offer global service by late 2021. But delays and extra costs – worsened by Russia’s invasion of Ukraine, which lost the company its launch partner – mean it has only two-thirds of its fleet in operation, and the rest is not likely to be in service until 2023.
OneWeb’s inferior position in the deal is shown by the announcements of who will run the combined company.
In a joint statement, London-based OneWeb and Paris-based Eutelsat said that Sunil Bharti Mittal (pictured), executive chairman of OneWeb and representative of OneWeb’s biggest shareholder, will be co-chairman or vice president of the merged company.
Other significant OneWeb executives, including CEO Neil Masterson, are not mentioned in today’s announcement.
It effectively means that Eutelsat, a geostationary (GEO) satellite company whose revenues are falling 4.8% year on year, will absorb OneWeb, though the UK low Earth orbit (LEO) unit will retain its name.
Mittal, who runs Indian and African mobile operator Bharti Airtel, said: “Bharti, as the lead shareholder of OneWeb, along with other key shareholders, is looking forward to playing a meaningful role in providing expanded connectivity through the combination of OneWeb and Eutelsat.”
Berneke, a former executive with Danish operator TDC who was then CEO of KMD, a Copenhagen-based IT and software company owned by NEC, was appointed to run Eutelsat as recently as December 2021.
She has taken a forthright view of Eutelsat’s 23% stake in OneWeb since she moved into the company. The two formed a marketing relationship in March this year and this morning she said: “Our initial investment in OneWeb was underpinned by our strong belief that the future growth in connectivity will be driven by both GEO and LEO capacity.”
She added: “We are now moving to the next level, with a full combination that will ensure the potential of the GEO/LEO integration is fully realized, supported by compelling financial, strategic, and industrial logic.”
Eutelsat shareholders and OneWeb shareholders will each hold 50% of the shares in the expanded Eutelsat following the merger.
Eutelsat’s main shareholders, Bpifrance – Banque publique d’investissement, a French public investment bank – and Fonds Stratégique de Participations (FSP), an investor owned by insurance companies, have backed the deal, as has another shareholder, CMA CGM, a French container transportation and shipping company.
Also in support is the UK government, which worked with Bharti two years ago to pull OneWeb out of chapter 11 bankruptcy. It owns 17% of OneWeb after the arrival of other shareholders diluted its initial stake, and will also retain a golden share to protect its investment.
The transaction values OneWeb at $3.4 billion, implying the UK’s stake is worth $578 million, a modest 16% increase on the $500 million it put into the company in July 2020. At closing, Eutelsat would own 100% of OneWeb, excluding the UK’s special share.
After the merger, Eutelsat will combine its 36-strong fleet of GEO satellites with OneWeb’s existing constellation 428 LEO satellites, with another 220 awaiting launch. OneWeb’s launch programme was interrupted in February after Russia – the company’s launch provider – invaded Ukraine.
OneWeb has since agreed a contract with Elon Musk’s SpaceX to launch the remaining satellites in its first phase.
That will incur extra costs for OneWeb, as the original launch programme – with Arianespace and Roscosmos – was paid by the pre-Chapter 11 OneWeb, which also prepaid the satellite production cost – and the Airbus/OneWeb factory in Florida will have to extend its production schedule to replace the 36 satellites seized by Roscosmos from the launch site in February, adding further cost.
Another deal that might be in question following the merger is an agreement by UK prime minister Boris Johnson last April that OneWeb is planning launches with New Space India. Even if Johnson had the right to make the decision, he will no longer be prime minister after early September 2022, and the expanded Eutelsat will be wanting to make its own choices.
