Eutelsat and OneWeb to create satellite broadband behemoth – with IoT promise
France-based Eutelsat and UK-based OneWeb have signed a provisional takeover deal, which values OneWeb at $3.4 billion, and would, if pursued and passed, would create a European satellite rival for the likes of SpaceX-owned Starlink. The pair have agreed to combine their satellite connectivity businesses, both focused mainly on broadband connectivity, in an all-share transaction that will see shareholders of both firms own 50 percent of the new entity. The deal raises the prospect that OneWeb’s low-earth orbit (LEO) satellites will be enabled for low-power wide-area (LPWA) IoT, including both unlicensed LoRaWAN and, potentially, down the line, cellular-based NB-IoT.
A memorandum of understanding proposes the two firms are combined in an all-share trade, where existing OneWeb shares (excluding shares retained by the UK government) are exchanged for 230 million newly-issued Eutelsat shares, and shareholders on both sides take half-ownership of the enlarged share capital. The $3.4 billion price tag values OneWeb at €12 each. The deal, subject to regulatory approval and final shareholder signoff, is expected to take a year to complete (“first half of 2023”).
Eutelsat acquired a stake in OneWeb in April 2021; the pair also have a global distribution agreement, and a brand new go-to-market exclusive to address global cruise markets. The new deal, which will make Eutelsat the parent of the expanded joint-business, proposes an exchange of OneWeb shares (excluding shares retained by the UK government) for 230 million newly Eutelsat shares. Under the terms of the proposal, OneWeb would continue to operate from its existing UK base under its existing brand. Eutelsat, as outright parent, would remain in France.
The deal would combine Eutelsat’s fleet of 36 high-orbit geosynchronous (GEO) satellites with OneWeb’s 648 LEO satellites, of which 428 are currently in orbit. Eutelsat also has three LEO satellites for LoRaWAN, with a plan to expand to 25. It is “totally possible”, said one source close to the two companies, that new generations of the UK firm’s ELO fleet will host ancillary low-power IoT payloads – either as conduits for IoT traffic where no terrestrial LoRaWAN networks exist, or where (post satellite-enabled Release 17/18) NB-IoT is patchy.
Which is the Enterprise IoT Insights angle. The pair quoted a 2021 forecast that the satellite connectivity market, for consumers and enterprises, will grow 300-500 percent by 2030, to reach a value of around $16 billion. They are betting on “mid-teen” compound annual EBITDA growth “over the medium to long term”, outpacing sales growth. The cap-ex of the combined entity is estimated at €725-€875 million per annum to the end of the decade; a combined entity would be worth €1.2 billion in revenues and €0.7 billion in EBITDA of, as of 2022/23.
They reckon that, combined, they can create revenue synergies of €150 million after four years from hybrid offerings, annual savings of about €80 million after five years by “joining organisational forces”, and further cap-ex savings of about €80 million per annum. The logic says the combination of high throughput GEO and low latency LEO satellites will “address an even wider range of customer needs”. A statement described a “clear roadmap” to develop a complementary GEO/LEO service, including a common platform, hybrid terminals, and a “fully mutualized network”.
A new board would consist of 15 members, including 10 independent directors. Eutelsat chairman Dominique D’Hinnin would continue as chairman, with OneWeb executive chair appointed as co-chair; Eutelsat chief executive Eva Berneke would continue in the same role at the expanded business. Investors Bpifrance, Fonds Stratégique de Participations, Bharti, HMG, SoftBank, and Hanwha have signed the memorandum.
D’Hinnin said: “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… solutions to… an even wider range of applications. This combination will accelerate the commercialisation of OneWeb’s fleet, while enhancing the attractiveness of Eutelsat’s growth profile. [It] carries significant value creation potential, anchored on a balanced mix of revenue, cost and capex synergies… This is truly a game changer for our industry.”
Bharti Mittal said: “The positive early results of our service together with our strong pipeline represent a very exciting opportunity in the fast-growing satellite connectivity segment, especially for customers requiring a high speed, low latency experience. Our customers are actively seeking a combined GEO/LEO offering leading us towards this important step. Bharti, as the lead shareholder of OneWeb, along with other key shareholders, is looking forward to playing a meaningful role in providing expanded connectivity through the combination of OneWeb and Eutelsat.”