July 26, 2022
French satellite company Eutelsat and UK-government backed OneWeb have signed a Memorandum of Understanding to merge.
The arrangement, billed as a merger of equals, will see Eutelsat – after issuing 230 million new shares to allow OneWeb shareholders to take a 50% stake in the French company – completely own the new, enlarged entity. The transaction values OneWeb at $3.4 billion.
OneWeb owners include India's Bharti Global (with a 36% stake, as far as Light Reading can make out), which is owned by Indian billionaire Sunil Bharti Mittal – also OneWeb's executive chairman – and the UK government (nearly 18%).
Bharti Global and the UK government rescued OneWeb from bankruptcy with a $1 billion package in November 2020. The Indian firm plowed another $500 million into OneWeb in June last year. Eutelsat also has a 23% stake in UK-based OneWeb after investing $550 million in April 2021.
The upshot, should the merger go ahead, is that the new-look Eutelsat will have an eclectic mix of shareholders – and perhaps a source of political tension – with India, the UK, France and China all in the mix. The French government currently holds a 20% stake in Eutelsat, while the Chinese government has a 5% stake in the Paris-based satellite company.
The UK government and Bharti Global (for OneWeb) and the French government (for Eutelsat) will have representation on a new 15-member board.
The beefed-up European satcomms company will combine Eutelsat's fleet of 36 geostationary (GEO) satellites with OneWeb's constellation of 648 low-Earth orbit (LEO) satellites (of which 428 are currently in orbit).
The idea, it seems, is to provide stiffer competition to Elon Musk's Starlink and Amazon's Project Kuiper.
"Bringing together our two businesses will deliver a global first, combining LEO constellations and GEO 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 Eutelsat chairman Dominique D'Hinnin in prepared remarks. D'Hinnin was flagged as chairman of the combined entity, with Mittal as co-chairman. Eva Berneke, Eutelsat's CEO, keeps the same job for the new-look Eutelsat.
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News of the OneWeb merger has not been entirely painless for Eutelsat investors. To fund further investment in the combined entity, the French company said it will cut its dividend. This was something markets anticipated when news of merger talks was confirmed yesterday by Eutelsat, which sent its share price tumbling by 17%.
The new company, claimed Eutelsat and OneWeb, will have revenue of about €1.2 billion ($1.23 billion) and core earnings of around €700 million ($709 million) by the 2022/2023 financial year.
Turnover is forecast to grow at a low double-digit CAGR rate over the next decade.
Eutelsat will continue to be listed on Euronext Paris and apply for admission to standard listing on the London Stock Exchange.
— Ken Wieland, contributing editor, special to Light Reading
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