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French satellite company Eutelsat has entered into discussions with the British-government owned OneWeb over a potential merger.
Eutelsat said the combined firm would be the first multi-orbit satellite operator offering both low-Earth orbit (LEO) and geostationary orbit communication services and would be “uniquely positioned” to take advantage of the satellite connectivity market.
OneWeb commenced launches of its satellite constellation – a network of more than 650 LEO satellites designed for internet services – in February 2019.
The UK government bought a stake in the firm in 2020 when it entered bankruptcy after failing to raise the requisite capital to complete the build and deployment of the remaining 90 per cent of the network.
The purchase was seen as a means to expand the UK’s space industry, following its withdrawal from the EU and its Galileo project. The OneWeb service is finally expected to be fully deployed in 2023.
Eutelsat currently holds 23 per cent of shares in OneWeb, alongside Indian conglomerate Bharti Enterprises which owns 38 per cent and the UK government which holds 19 per cent.
Under the terms of the transaction being discussed, Eutelsat and OneWeb shareholders would each hold 50 per cent of the combined group’s shares.
The transaction would be structured as a contribution by OneWeb’s shareholders of their stake in OneWeb to Eutelsat in exchange for newly issued Eutelsat shares. Any combination would be subject to approval by the majority of Eutelsat shareholders and receipt of all relevant anti-trust and regulatory approvals.
“There can be no assurance that these discussions will result in any agreement. Eutelsat will inform the market as soon as soon as there are any new developments,” the firm said.
“From an anti-trust point of view, this deal is likely to be scrutinised heavily and will also likely need political consensus from both the UK and EU at a time when the UK is choosing a new Prime Minister,” Credit Suisse said in a note.
Eutelsat estimates that the ‘satellite connectivity’ market will be worth around $16bn (£13bn) by 2030.
In April it was confirmed that OneWeb had signed a contract with India for future rocket launches after the Ukraine invasion cut off its ability to use Russian rockets.
Elon Musk’s SpaceX is one of the firm’s biggest rivals with its growing Starlink service which is also designed to provide internet connections from space to remote locations around the globe.
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