UK and France to get board seats in planned combination of Eutelsat and OneWeb
The British and French governments will each have a seat on the board of a new satellite operator aiming to take on billionaire space entrepreneurs Elon Musk and Jeff Bezos in a merger debated on Sunday between Eutelsat and OneWeb.
Paris-listed Eutelsat and OneWeb, the space internet pioneer saved from collapse by a billion-dollar UK bailout in 2020, are set to strike an equity deal that aims to create a company with the financial firepower to compete in the market. rapid growth of the space connectivity market.
A merger would address Eutelsat’s need for new growth to offset a declining satellite video business and OneWeb’s requirement for $2-3 billion in investments to complete its network and update its technology. , according to people familiar with the deal.
A deal could also help revive cooperation between Brussels and London on space projects after disputes over the post-Brexit deal between the EU and the UK damaged relations. Tensions over Northern Ireland’s protocol governing trade between the province and the rest of the UK have led to a stalemate over issues such as the UK’s participation in Copernicus, the Earth observation program .
People familiar with the deal warned that while many issues had been worked out, the final deal was yet to be reached by Sunday evening. But many expect a deal to be unveiled as early as Monday.
Under terms being discussed, Sunil Bharti Mittal, the current chairman of OneWeb and its largest shareholder through his Bharti Global group, is expected to serve as co-chairman of the combined company. Bharti will own a stake of around 18%, according to two people with knowledge of the deal.
Eva Berneke, current CEO of Eutelsat, should remain in her post.
The UK and French governments are expected to have similar stakes of around 10% and one board seat each. France‘s stake will be held through the Banque Publique d’Investissement, a state-backed business development bank.
Britain will also retain its gold stake in OneWeb, giving it veto power over sales for national security reasons, and rights over the location of the head office and any technology transfer. France will also receive guarantees on Eutelsat’s headquarters.
OneWeb and Eutelsat declined to comment.
The operation is the culmination of a long-standing ambition of Eutelsat to integrate OneWeb more closely into its offer.
The French company took a 24% stake in OneWeb in 2021 and in March announced a joint marketing agreement to bring low Earth orbit (LEO) capabilities from UK operators to its customers.
Dozens of companies around the world are rushing to claim LEO’s new emerging business opportunities. Musk’s Starlink has already launched more than 2,000 satellites in LEO and is developing commercial service in many parts of the world. Jeff Bezos’ Project Kuiper also plans to launch a mega-constellation of satellites in the coming months.
Eutelsat also hopes the deal will encourage Brussels to consider OneWeb as a platform for the EU’s proposal to build its own space internet service from low Earth orbit. This had been deemed difficult under the previous ownership structure.
Still, it’s a big bet for Eutelsat and could raise challenges from investors, an analyst said.
“Eutelsat has close to €500 million in discretionary free cash flow, most of which could probably be spent on a project like OneWeb,” said Armand Musey, founder of consultancy firm Summit Ridge. “The main thing is that the [traditional] the industry is in decline and Eutelsat apparently sees OneWeb as a way to generate growth. It is a big risk to “bet on the farm”.
It could also prove politically “tricky”, said another analyst. “The UK government had seen its investment in OneWeb as a way to advance UK space sovereignty, but those goals could be subsumed by Eutelsat ownership,” said Chris Quilty of Quilty Analytics. OneWeb’s ability to secure an Arctic communications contract with the US Department of Defense could also be at risk because “France is not a member of the Anglo Five Eyes security coalition”.
Officials said the deal valued the UK government’s stake at $600 million, a paper profit of $100 million.
A merger will absolve the UK government of any liability for the considerable investment still required to complete OneWeb’s business plan. Many senior officials expressed relief that the burden had been shifted. Officials said Defense Secretary Ben Wallace was not in favor of the UK government taking a stake in the company in the first place.
“The MoD had no intention of using it – we weren’t interested in it,” a senior official said. “Ben always thought it was a Dominic Cummings fantasy [Boris Johnson’s former chief adviser] because he was obsessed with space.