Eutelsat, OneWeb Plot Merger That Will Challenge Billionaires Elon Musk, Jeff Bezos In Space Race
Topline
French and British satellite firms Eutelsat and OneWeb on Tuesday announced plans to combine forces and create a “global leader” in the burgeoning space-based internet industry, a deal which pits them against similar U.S. ventures spearheaded by the likes of Elon Musk and Jeff Bezos.
A rocket lifts off from its launchpad at the European Space Center in French Guiana.
Key Facts
Eutelsat and OneWeb said in a joint statement that the proposed deal would combine resources—Eutelsat has a 36-strong fleet of geostationary satellites and OneWeb has a constellation of 648 Low Earth Orbit satellites—to create a “leading global player” in space-based connectivity.
The deal, which values the privately held U.K. satellite operator OneWeb at $3.4 billion, will see OneWeb shareholders exchange their shares for new ones issued by Eutelsat, which will amount to a 50% stake in the new combined entity.
The company will continue to have a primary listing in Paris and will also seek a listing on the London Stock Exchange, according to the statement.
Major shareholders of both companies—which include the U.K. government, entities owned by the French and Chinese states and Indian telecoms billionaire Sunil Bharti Mittal—have come out in support of the deal and will be equally represented on the entity’s 15-person board.
Eutelsat and OneWeb said the new, combined entity will be “uniquely positioned to capture” the fast-growing global connectivity market and could generate €1.5 billion ($1.53 billion) in cost synergies and increased revenue.
Eutelsat chairman Dominique D’Hinnin, who is the proposed chairman of the combined entity, said the deal is a “game changer” for the industry and will accelerate the commercialization of OneWeb’s fleet.
Key Background
The deal, as well as the willingness of European governments to accommodate security concerns surrounding Chinese involvement, underscores the high stakes at play in the frenetic race to commercialize space. The merger, if successful, would create a European challenger to take on ventures headed by the likes of Elon Musk and Jeff Bezos, respectively SpaceX’s Starlink and Amazon’s Kuiper Systems. The American billionaires have been pumping money into the nascent industry for years. The pair have also famously butted heads over their efforts to prevail in space, including these projects to deliver internet access from orbit using a constellation of satellites. The nature of these satellite constellations and the entry of private companies into a domain ordinarily occupied by states has caused headaches for regulators and scientists.
News Peg
Shares in Eutelsat plummeted around 18% on Monday after the company confirmed merger talks with OneWeb. Analysts speculated that the selloff signaled disappointment among investors that the company would be directing cash towards the deal and future investments as opposed to immediate returns for shareholders. As part of the proposed merger, Eutelsat will suspend its dividend for two years.
What To Watch For
Vetting and clearance from regulators. The deal is still subject to approval from regulators and is likely to be “scrutinized heavily” from an antitrust perspective, according to Credit Suisse, Reuters reported. The deal “will also likely need political consensus from both the U.K. and EU at a time when the U.K. is choosing a new Prime Minister,” the note added. The deal will also require national security clearances, particularly given the involvement of British, French and Chinese states and the strategically important nature of the industry. As major shareholders, which includes the U.K. government after it bailed out OneWeb during the Covid-19 pandemic, have provisionally agreed to the deal, these complications have at least partially been dealt with. The companies said the deal is expected to close by the end of the first half of 2023.
Big Number
$16 billion. That’s how much Eutelsat estimates the “satellite connectivity” market will be worth by 2030.
Forbes Valuation
$13.1 billion. That’s the estimated net worth of Mittal and his family, according to Forbes’ real-time tracker, one of the richest in India. Mittal’s Bharti Airtel is one of India’s largest mobile phone operators.
Further Reading
Astronomers stand up to satellite mega-constellations (BBC)
Jeff Bezos And Elon Musk Are Now Butting Heads Over The Small Satellite Internet Business (Forbes)
