French satellite operator Eutelsat announced on Tuesday its merger with Britain’s OneWeb and its constellation. The operation should create a giant in the race for the internet from space, facing the mastodon Starlink of the American group SpaceX.
After announcing on Monday that it was in “discussions (…) with a view to a possible merger” with OneWeb, in which it already holds a 23% shareholder, Eutelsat confirmed the signing of a “memorandum of understanding”. It provides for a 50-50 joint venture whose headquarters will remain in France and which will continue to be listed in Paris.
In parallel, the merged company will also seek to enter a segment of the London Stock Exchange. The transaction will be made by exchanging OneWeb shares and values at 3.4 billion dollars implying a value of 12 euros per Eutelsat share, the company said in a press release.
The transaction is expected to be completed ‘at the end of the first half of 2023’. Eutelsat’s share, a specialist in geostationary orbit with its fleet of 35 satellites positioned 36,000 kilometers from Earth for satellite broadcasting and broadband internet services, lost 17.79% to 7.04 euros, in a down market of 0 .29%, just before 2:00 PM.
The stock had already fallen nearly 18% on Monday. The deal raises concerns due to short-term cash flow needs and reliance on government contracts, according to Deutsche Bank analyst Roshan Ranjit.
The group’s chief executive, Eva Berneke, however, defended during a conference call on Tuesday her plan to create “a growth-oriented group”, admitting that it represented “a big change for some shareholders”. The British company OneWeb has already deployed 428 of the 648 satellites in its constellation in low orbit, a few hundred kilometers above sea level, in order to provide high-speed, low-latency internet, that is, fast data transmission.
In addition to the Indian conglomerate Bharti (30%) and Eutelsat (22.9%), OneWeb’s capital includes the British government (17.6%), the Japanese Softbank (17.6%) and the Korean conglomerate Hanwa (8, 8%). Eutelsat is 20% owned by Bpifrance, the French state’s public investment bank, as well as by the Strategic Participation Fund (FSP), owned by seven French insurance companies, with the remainder being floating capital.
Connect isolated regions
The project aims in particular to serve isolated regions without fiber optics. A market estimated at 16 billion dollars by 2030, according to Eutelsat. In this race, the SpaceX of the American billionaire Elon Musk has taken a step forward. More than half of the 4,408 satellites in his Starlink constellation have already been deployed (he wants 42,000 eventually). Amazon founder Jeff Bezos plans to deploy more than 3,200 satellites for his Kuiper constellation.
The European Union also wants to deploy its own low-orbit constellation of around 250 satellites from 2024, in the name of sovereignty. “We don’t know what the future European constellation will look like, but we are looking forward to starting a dialogue with the Commission,” Berneke said.
As for China, it has its own constellation project, Guowang, with 13,000 satellites. “Low-orbit constellations are a market that could become strategic for governments,” Romain Pierredon, an analyst at AlphaValue, told AFP on Monday.
The deployment of the OneWeb constellation has been suspended since February and the invasion of Ukraine. The first two-thirds of the constellation was put into orbit by Russian Soyuz rockets. “This could delay us for a long time … but we have received tremendous support from the United States and the Indian government,” OneWeb Executive Chairman Sunil Bharti Mittal said Tuesday, adding that a contract for 3 ,5 launches have been completed with SpaceX and that the Indian government has made available 2 GLSV rockets to complete the constellation deployment ‘certainly by March 2023’.