with OneWeb, Eutelsat wants to compete with American constellations

The spatial internet is in chaos. This Tuesday, Eutelsat announced that signed “a memorandum of understanding” to marry the British OneWeb and its constellation. On Monday, the two groups introduced themselves entered into discussions to merge. the deal seems complicated to say the least, but could be a juggernaut in today’s burgeoning Internet space.

This marriage will take the form of a share exchange transaction. The shareholders of Eutelsat and OneWeb will each hold 50% of the shares of the combined group. “Upon completion of the transaction, Eutelsat will own 100% of OneWeb and OneWeb shareholders will receive 230 million newly issued Eutelsat shares (representing 50% of the current capital.)”both groups will be announced on Tuesday. The transaction costs OneWeb “of 3.4 billion dollars which means a value of 12 euros per Eutelsat share (including the dividend, before synergies)”, specify two operators. According to them, the potential for further value creation is explored “of 1.5 billion euros after income tax, capital expenditure and cost synergies”.

Above all, the United Kingdom can preserve it “special rights”as pointed out on Monday Financial Times. “These rights include a right to veto certain customers deemed undesirable for national security reasons, as well as a right to manage the supply chain and launch decisions”said the daily.

According to Eutelsat, this marriage will give birth to “first operator of multi-orbit satellites, offering GEO/LEO (geostationary and low orbit, editor’s note) solutions”. In fact, Eutelsat has a fleet of about 35 geostationary satellites. It is located 36,000 kilometers from Earth, and offers a high and very high Internet connection.

For its part, OneWeb plays on a different board. His project is to build a constellation of smaller satellites, and is located in a low orbit, several hundred kilometers above sea level. About 428 of them are operational, from the 628 that are currently intended to be deployed. His service is expected at the end of the year. The advantage of these satellites is that they have latency – the response of the network when requested – much lower than their counterparts in geostationary orbit. This makes it a solution of choice for some critical applications, such as the connected car.

Starlink is a step forward

Satellite constellations are the subject of intense development worldwide. With OneWeb, Eutelsat believes it is well positioned to address this connectivity market, which it believes “to 16 billion dollars by 2030”. But the challenge is above all not to be defeated by competing projects. And in the first place those from the United States.

In Uncle Sam’s land, Elon Musk’s Starlink constellation is far more advanced. It already has more than 4,400 satellites. Its service, although very expensive, works in many countries, including France. It particularly distinguished itself in Ukraine, where it brought the Internet when traditional telecom infrastructures no longer functioned properly.

Also in the United States, Jeff Bezos, the founder of Amazon, plans to deploy 3,200 satellites for his Kuiper constellation. China is also developing itself. Called Guowang, it should have about 13,000 satellites. The European Union also wants to have its constellation, especially not to depend on foreign technologies. It wants to launch about 250 satellites, but only from 2024.

OneWeb satellites are considered obsolete

This marriage with Eutelsat will give OneWeb more resources to invest and perfect its constellation project. Today its satellites are considered obsolete, especially by Elon Musk. In the summer of 2020, General Michel Friedling, head of the Space Command, severely criticized OneWeb in a hearing of the National Assembly. The soldier felt that compared to other projects, “OneWeb offers an older generation and an architecture that is not free of defects”.

The British group also came very close to crash. OneWeb went bankrupt two years ago, in the midst of a pandemic, when the Japanese Softbank, which was the main financial backer, refused to take the checkbook of a new round of funding. The constellation was saved to the extreme the British government and the Indian conglomerate Bharti. Today, Bharti holds 30% of its capital. London and Softbank each have 17.6%. Korean conglomerate Hanwa owns 8.8%. As for Eutelsat, which entered the capital of OneWeb last year, it has almost 23% of the capital.

For its part, Eutelsat is 20% controlled by the French State, through Bpifrance, the public investment bank of the French State. The Strategic Participation Fund (FSP), held by seven French insurers, owns 7.6%.

Satellite constellations have attracted increasing interest. True, their telecom services remain less powerful than fiber, 4G or 5G. However, their ability to provide connectivity to any point in the world can prove very effective in covering rural areas and territories that lack terrestrial telecom infrastructure. In addition, the use of Starlink in Ukraine shows that satellite Internet is an alternative of choice when traditional networks no longer work properly. But today, no country can afford to be cut off from the Internet, which has become essential for all businesses and public services.