Eutelsat Complete Merger with UK Satellite Broadband Operator OneWeb

European satellite operator Eutelsat has today announced the completion of their all-share combination with London-based broadband satellite operator OneWeb, which had been partly owned by the UK Government but will now become a subsidiary of the Paris-based operator.

Just to recap. OneWeb has already launched 634 of their small (c.150kg) first generation (GEN1) Low Earth Orbit (LEO) broadband satellites into space – orbiting at an altitude of 1,200km above the Earth (588 of them for coverage and the rest are for redundancy). The network was technically completed in March 2023 (here) and promises both ultrafast speeds and fast latency times. But some work (e.g. ground stations) still needs to be completed before full global coverage goes live by the end of 2023.

The operator also has plans to launch another 1,280 satellites in the future (funds allowing), which are expected to reflect a GEN2 model that could sit in a higher Medium Earth Orbit (MEO) of 8,500km. The GEN2s are widely expected to have more data capacity, support for 5G mobile and may, possibly, introduce enhanced navigation and positioning features (something the UK government wanted to add).

However, building and launching the GEN2s will require more investment, which is where the merger with existing investor Eutelsat could prove pivotal. The key development today is that the deal has been approved at the Ordinary and Extraordinary General Meeting of Eutelsat shareholders. OneWeb has thus become part of the Eutelsat Group.

Under the agreement, Eutelsat will remain headquartered in Paris, while OneWeb will be a subsidiary operating commercially as Eutelsat OneWeb with its centre of operations remaining in London. Eutelsat currently remains listed on the Euronext Paris Stock Exchange and has applied for standard listing on the London Stock Exchange (LSE).

Eutelsat’s existing fleet of larger GEO communication satellites will now aim to combine network density and high throughput with the low latency and ubiquity of OneWeb’s LEO constellation to offer customers global, fully integrated connectivity services – focusing on Fixed Connectivity (Backhaul, Corporate networks), Government Services and Mobile Connectivity (Maritime and In-flight).

Dominique D’Hinnin, Chairman of the Board of Directors, said:

“This is an historic moment for the satellite industry. We are bringing together two businesses that are at the forefront of delivering integrated, seamless and reliable connectivity to customers worldwide.

We will be moving fast to accelerate the growth of the combined business. With the support of strategic shareholders of both entities, we are confident of maximising financial performance and operational excellence, while capitalising on the high-return investment of next generation satellites.

I would like to pay tribute to all colleagues who have ensured we can successfully deliver this combination. We are ready to provide connectivity and services that will support economic and social development globally as a trusted partner for multi-orbit connectivity.”

Naturally, this merger did pose a politically awkward problem for the UK Government, which alongside Bharti helped to rescue OneWeb from bankruptcy in 2020 and held a golden share in the company. Previous reports suggested that the Government had balanced this by negotiating some concessions, although today’s announcement only indirectly mentions one of these.

Reported Concessions to the UK for OneWeb Merger

➤ The UK will retain a veto on sales of services that could pose a risk to UK national security.

➤ A veto over any decision to shift OneWeb’s HQ out of the UK.

➤ The UK will hold first-preference rights over supply chain, manufacturing and launch opportunities that might be covered by UK companies.

➤ Shares will be launched on the London Stock Exchange (LSE) as part of a secondary listing in the near future.

ISPreview understands that today’s deal means that the UK Government will indeed keep its existing key “special rights and vetos” in respect of OneWeb (and OneWeb only). This is via a special share and includes a veto on specific points relating to national security, IP and changes to the nature and scope of OneWeb’s business.

Meanwhile, Eutelsat has gained by securing a quicker route into the relatively new market for LEO based broadband satellites, which will be able to complement their existing fleet of larger satellites in a high geostationary earth orbit. Eutelsat’s latest Very High Throughput Satellite (VHTS) launched last September (here). However, we don’t expect to see the first non-trial MEO satellites from Eutelsat OneWeb until 2024-25, assuming that plan does proceed.

The combined entity is now expected to grow at a double-digit revenue CAGR over the medium to long-term, reaching c. €2bn in 2027. Adjusted EBITDA for the combined entity is expected to grow at a double digit CAGR over the same period, outpacing revenue growth.