OneWeb one of several companies hoping to sell Internet connections from space filed for Chapter 11 bankruptcy Friday, shortly after the Financial Times reported the company might do so.
The development follows a similar report from Bloomberg on March 19 warning that OneWeb executives were contemplating bankruptcy. OneWeb itself confirmed last week it had conducted layoffs that, TechCrunch reported, were as high as 10% of its workforce.
Citing unnamed sources, the FT reported Friday that OneWeb which has so far raised a whopping $3.4 billion from investors including SoftBank, Virgin Group, Qualcomm and Bharti Enterprises had attempted to secure as much as $2 billion more from struggling SoftBank, but the financial upheaval caused by the spread of the new coronavirus recently brought an end to those talks. The publication reported that most of OneWeb's 500 employees will likely be out of a job by next week, and that satellite production in the company's manufacturing facility in Florida will cease as a result.
"Since the beginning of the year, OneWeb had been engaged in advanced negotiations regarding investment that would fully fund the Company through its deployment and commercial launch," OneWeb wrote in a press release Friday about its filing. "While the Company was close to obtaining financing, the process did not progress because of the financial impact and market turbulence related to the spread of COVID-19."
OneWeb has so far put roughly 70 low-Earth orbit (LEO) satellites into space, well below its initial goal of around 600 for commercial service in the latter part of 2020. The company declined to comment on the FT's report.
In its release, OneWeb said it is pursuing a sale of the business.
Eyes turn to Musk
What's more noteworthy is the shadow OneWeb's struggles cast over SpaceX's Starlink efforts. SpaceX backed by billionaire entrepreneur Elon Musk is working to get its own Starlink-branded constellation of LEO satellites into space via its Starship space-transportation business.
But, according to analyst Tim Farrar with TMF Associates, SpaceX has been working this year to drum up extra money for its orbital ambitions. For example, Farrar pointed to a Wall Street Journal report indicating that SpaceX is lobbying FCC officials to make Starlink eligible for the agency's $20.4 billion Rural Digital Opportunity Fund. The FCC will begin doling out money from the fund in October to telecom companies that agree to offer Internet connections in rural parts of the US.
That money is clearly of interest to Musk and his Starlink initiative, considering he said earlier this month that one of his main goals for the business is to "be in the not-bankrupt category."
Even more pressing, Farrar noted that SpaceX has failed to raise the money it had hoped for. He pointed to comments from the company on March 9 indicating interest in raising $500 million, but a filing on March 13 showing the company raised just $221 million. "That's no more than two months of cash burn at SpaceX's current rate of spend," Farrar wrote.
"SpaceX is currently heading on autopilot towards a concrete wall of bankruptcy," Farrar concluded, noting that the company could seek funds from the US government considering it has taken over some of the space work that NASA used to do.
Why this matters
Many in the telecom industry have been watching with interest the evolution of the LEO Internet-from-space industry. After all, OneWeb's initial satellites clocked 400 Mbit/s downloads with 32-millisecond latency in receivers on the ground figures roughly comparable to terrestrial cable, fiber and 5G offerings.
OneWeb has said those speeds will help it target a wide variety of market sectors, including selling Internet services to regular customers as well as connections for businesses and government uses. The company has also said it can supply backhaul connections for remote 5G cell towers.
Musk himself said earlier this month at a satellite trade show that "Starlink is not some huge threat to telcos. I want to be super clear: it is not."
But Musk's reported interest in the FCC's RDOF program tells a slightly different story, particularly if Starlink bids directly against the likes of Windstream, CenturyLink and others for a slice of the FCC's rural broadband funding.
However, if the COVID-19 financial crisis deepens, the nascent LEO satellite Internet industry could well be put on an indefinite and potentially financially crushing hold.