Eutelsat, OneWeb Agree to Merge to Rival Elon Musk’s Starink in Fast Growing Broadband Internet Market

French and British satellite operators Eutelsat and OneWeb on Tuesday announced plans to merge and create a “global champion” in the fast-growing broadband internet market, rivalling US giants such as Elon Musk’s Starlink.

Eutelsat and OneWeb said in a joint statement they had signed a memorandum of understanding to join forces to become “a leading global player in connectivity… in an all-share transaction”.

Satellite broadband promises to bring coverage to the most remote areas of the planet by doing away with the need for antennas and other infrastructure and Eutelsat said the market was projected to grow to $16 billion (roughly Rs. 1,27,600 crore) by 2030.

In what they said would be “a game-changer in the industry”, Eutelsat would combine its 36-strong fleet of geostationary Earth orbit (GEO) satellites with OneWeb’s constellation of 648 low Earth orbit satellites (LEO), of which 428 are currently in orbit.  

GEO satellites orbit thousands of kilometres (miles) from Earth and are more commonly used for TV and other communications, while LEO satellites are smaller and orbit just a few hundred kilometres above the Earth. 

“This ground-breaking combination will create a powerful global player with the financial strength and technical expertise to accelerate both OneWeb’s commercial deployment, and Eutelsat’s pivot to connectivity,” said Eutelsat chief executive, Eva Berneke.

“The combined entity will be geared towards profitable growth” with a potential for “double-digit” increase in both sales and profit “over the medium to long term”, both companies said.

“This combination accelerates our mission to deliver connectivity that will change lives at scale and create a fast-growing, well-funded company which will continue to create significant value for our shareholders,” said OneWeb CEO, Neil Masterson.

Equal stakes

Each company would hold a 50-percent stake in the combined entity, they said. 

And the transaction would be structured as an exchange of OneWeb shares by its shareholders with new shares issued by Eutelsat. 

The deal valued OneWeb at EUR 3.4 billion (roughly Rs. 27,700 crore), implying a value of EUR 12 (roughly Rs. 1,000) per Eutelsat share, the statement said.

The transaction was subject to clearance from relevant regulatory authorities and was expected to close “by the end of first half of 2023”. 

Eutelsat already holds a 22.9-percent stake in OneWeb. 

The British operator’s other shareholders are Indian conglomerate Bharti with 30 percent, the British government with 17 percent, Japan’s Softbank with 17.6 percent and South Korean conglomerate Hanwa with 8.8 percent. 

Eutelsat, for its part, is 20-percent owned by French state-run investment bank Bpifrance, and a fund held by seven insurers, with the remainder of the share capital in free-float.

Stiff competition

While the market is rapidly expanding, the European firms face stiff competition.

Musk is not the only tech billionaire with plans to dominate the market. Amazon founder Jeff Bezos recently announced he intended to launch some 3,200 satellites.

Money is pouring into the sector, with Bezos apparently pledging $10 billion (roughly Rs. 79,760 crore) to his so-called Project Kuiper.

Public institutions are also looking to get in on the act.

China has a plan to launch a constellation of 13,000 satellites called Guowang and the European Union wants to deploy roughly 250 by 2024.

EU Internal Market Commissioner Thierry Breton said the satellites would help eliminates gaps in coverage, offer redundancy in case of cyberattacks on ground networks and also provide for encrypted communications by European governments. 

Analysts say low-orbit constellations are a market which could potentially become strategic for governments. 

And the UK’s Financial Times newspaper reported that both the French and British governments would have board seats at the combined Eutelsat-OneWeb company.