The UK and French governments will get seats on the board of a new satellite operator seeking to rival billionaire space entrepreneurs Elon Musk and Jeff Bezos under terms of a merger discussed Sunday between Eutelsat and OneWeb.
Paris-listed Eutelsat and OneWeb, the space internet pioneer rescued from collapse in 2020 by a $1 billion UK bailout, are close to agreeing an all-share swap deal that aims to build a company with the financial firepower to compete on the market. rapidly growing space communications market.
The merger will meet Eutelsat’s growth needs to offset its dwindling satellite video business, as well as OneWeb’s $2 billion to $3 billion investment needs to complete its network and upgrade its technology, according to people close to the deal.
The deal could also help revive cooperation between Brussels and London on space projects after disputes over a post-Brexit deal between the EU and the UK damaged relations. Tensions over the Northern Ireland protocol governing trade between the province and the rest of the UK have led to standoffs over issues such as the UK’s participation in the Copernicus Earth Observation Program.
People close to the deal warned that while many issues had been resolved, a final agreement had yet to be reached by Sunday evening. But many expect the deal to be made public as early as Monday.
Under the terms being negotiated, Sunil Bharti Mittal, chairman of OneWeb and its largest shareholder through his Bharti Global group, is expected to become co-chairman of the combined company. Bharti will own approximately 18 percent of the shares, two people with knowledge of the deal said.
Eva Bernecke, chief executive of Eutelsat, is expected to remain in her post.
The UK and French governments are expected to have similar stakes of around 10% and one seat on the board. France’s stake will be held by Banque Publique d’Investissement, the state-owned business development bank, which currently holds a 19.9% stake in Eutelsat.
The UK, which owns just under 18% of OneWeb, will also retain its golden share in the company, giving it veto power over the sale on national security grounds and rights to the headquarters location and any technology transfer. France will also receive guarantees for the Eutelsat headquarters.
OneWeb and Eutelsat declined to comment.
The deal is the culmination of Eutelsat’s longstanding commitment to integrate OneWeb more tightly into its offering.
The French company acquired a 24% stake in OneWeb in 2021 and in March announced a joint marketing deal to give its customers the capabilities of UK carriers in low Earth orbit.
Dozens of companies around the world are eager to make a name for themselves at the emerging LEO commercial opportunities. Starlink Mask has already launched over 2,000 satellites in LEO and is developing a commercial service in many parts of the globe. Jeff Bezos’s Project Kuiper is also planning 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 low-Earth orbit space internet service. This was considered difficult under the previous ownership structure.
Still, it’s a big gamble for Eutelsat that could cause problems for investors, one analyst said.
“Eutelsat has nearly €500 million in free cash flow, most of which it could probably spend on a project like OneWeb,” said Armand Musey, founder of consulting firm Summit Ridge Group. “The bottom line is that [traditional] the industry is in decline and Eutelsat appears to see OneWeb as a way to drive growth. This is a big risk to “put the farm on the line.”
It could also turn out to be “difficult” from a political standpoint, another analyst said.
“The British government saw its investment in OneWeb as a way to advance British space sovereignty, but those goals could be categorized as Eutelsat’s property,” said Chris Quilty of Quilty Analytics. OneWeb’s ability to secure an Arctic communications contract with the US Department of Defense could also be in jeopardy because “France is not a member of the Anglo Five Eyes security coalition.”
Officials said the deal valued the UK government’s stake in OneWeb at $600 million, with a paper profit of $100 million.
The merger will relieve the UK government of any responsibility for the significant investment required to complete the OneWeb business plan. Many senior officials expressed relief that the burden had been shifted. Officials said Defense Secretary Ben Wallace initially did not support the UK government acquiring a stake in the company.
“The Ministry of Defense did not plan to use it – it did not interest us,” said one of the senior officials. “Ben always thought it was a Dominic Cummings fantasy. [Boris Johnson’s former chief adviser] because he was obsessed with space.”
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