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July 25, 2022updated 26 Jul 2022 1:56pm

OneWeb and Eutelsat merge to create European rival to SpaceX and Amazon

The combined company could address all aspects of satellite communication, but may face antitrust scrutiny.

By Matthew Gooding

Plans for British satellite company OneWeb to merge with French rival Eutelsat were confirmed on Tuesday morning. The deal, which is subject to regulatory approval, would create a business with the scale to take on the likes of Starlink and Amazon in the increasingly crowded low-Earth orbit (LEO) satellite market.

OneWeb satellite
OneWeb is merging with French rival Eutelsat (Photo by dima_zel/iStock)

After Eutelsat confirmed on Monday that talks were ongoing between the companies, today it was revealed a memorandum of understanding had been signed, paving the way for a merger to be completed in the six-nine months.

“Bringing together our two businesses will deliver a global first, combining low earth orbit constellations and geostationary assets to seize the significant growth opportunity in connectivity, and deliver to our customers solutions to their needs across an even wider range of applications,” said Dominique D’Hinnin, Eutelsat’s chairman. “This combination will accelerate the commercialisation of OneWeb’s fleet, while enhancing the attractiveness of Eutelsat’s growth profile.”

The new company will control and deploy Eutelsat’s 36-strong fleet of GEO satellites and OneWeb’s constellation of 648 LEO satellites, of which 428 are already in orbit. It will have revenue of €1.2bn and retain joint headquarters in the UK and France.

OneWeb CEO Neil Masterson said: “Today’s announcement is another bold step in OneWeb’s remarkable journey. It is testament to the resilience, execution and innovation of our teams, the strong demand we have seen since launching our commercial services, and the close collaboration we have forged with our partners.”

The UK government, which owns a stake in OneWeb, said the merger is “positive news” for the taxpayer, and that the UK will remain the preferred location for future launches as part of the agreement.

Why is OneWeb merging with Eutelsat?

OneWeb is a developer of LEO satellites that provide communications systems such as internet connectivity. The company has a chequered past and was rescued from bankruptcy by the UK government and India’s Bharti Global in an £800m deal in 2020, with the government using £400m of taxpayers’ money to finance its share of the purchase.

At the time the government said the deal would enable OneWeb “to complete construction of a global satellite constellation that will provide enhanced broadband and other services to countries around the world,” and boost the UK’s post-Brexit space strategy.

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Since then the company has attracted further investment, diluting the UK’s share in the business to 24%. OneWeb has also struck a deal with Airbus which will see production of its technology move from the US to the UK by 2025.

The company’s progress means it is “becoming a going concern,” says Professor Marek Ziebart, professor of space geodesy at University College London. “They’ve attracted funding, got satellites into orbit, and are in the process of designing a second generation of their satellites,” he says. “They’re in a confident position at the moment.”

Indeed, as part of Tuesday’s announcement, Eutelsat said it is suspending shareholder dividends for two years in order to pump cash into R&D for OneWeb’s next generation satellites.

OneWeb vs Starlink in the battle for LEO domination

By bringing this technology together with Eutelsat’s GEO satellite systems, which are used for applications including high-precision navigation services, the combined company would be “uniquely positioned” to address the “booming” satellite connectivity market, which is set to be worth $16bn globally by 2030, the French company said.

When it comes to LEO satellites, OneWeb faces stiff competition from Elon Musk’s Starlink, which already has 2,500 satellites in orbit, and Amazon’s Project Kuiper, which has yet to deploy its machines but has plans for a 3,000-strong constellation and has agreed deals to make 83 launches over the next five years.

Professor Ziebart said that when it comes to the battle LEO supremacy, having satellites in the air gives OneWeb and Starlink a significant advantage. “Possession is nine tenths of the law, because in space there is no law,” he says. “OneWeb has been successful in its launch programme and it’s grabbing the orbital slots, and that’s quite real. So if you’re investing and want to have a slice of the global communications action, OneWeb is now a real asset, and I can see why Eutelsat wants to buy in.”

The deal would be the latest example of consolidation in the satellite industry as the technology matures. Last year, British GEO satellite provider Inmarsat announced it was being acquired by US rival Viasat.

Eutelsat-OneWeb deal: government investment set to pay off

The UK government retains a “golden share” in OneWeb, which means it can veto uses of the company’s technology which it considers to be a national security risk.

This could prove crucial as the deal progresses, as it is likely to face antitrust scrutiny in both the UK and the EU. Eutelsat’s largest shareholder is France’s state-owned investment bank Bpifrance, while other shareholders include China’s sovereign wealth fund China Investment Corp.

A government statement on Tuesday morning welcomed the merger, and said it would retain national security veto rights around the type of deals the the new company agrees. Agreements which could compromise the Five Eyes security alliance, made up of the UK, US, Canada, Australia and New Zealand would also fall under the remit of this veto, reports suggest.

Professor Ziebert says OneWeb’s progress means the government’s investment in the company looks set to pay off, and believes it could give it a geopolitical advantage. “LEO satellites are a completely new communications paradigm because once they’re launched you can broadcast a signal to anywhere on earth,” he says. “From a geopolitical perspective, having access to a rapid communications network like that is very powerful.

Because geostationary satellites orbit at a fixed point around the earth, there are gaps in their coverage, Professor Ziebart explains. But LEO offers the chance to have much more complete network, which could be used not only for communications, but to improve navigation systems which are delivered from geostationary craft by acting as an additional security system.

“There are a lot of navigation systems, but they are vulnerable to being spoofed and jammed,” Professor Ziebart says. “OneWeb offers an opportunity, because it has global coverage, to provide a service which isn’t a navigation system itself, but which augments and strengthens conventional systems. There is potentially the possibility to license a service like this, and that’s something which is being debated [in government] at the moment.”

Read more: Data centres in space could boost satellite computing power

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