PARIS — For the British government and India’s Bharti Global, Russia’s February invasion of Ukraine became a moment of truth regarding their OneWeb investment and directly led to Paris-based Eutelsat’s OneWeb takeover.

Following a memorandum of understanding between Eutelsat and OneWeb announced July 26, and pending final government and shareholder approvals, Eutelsat will take over OneWeb sometime in early 2023, marrying OneWeb’s low-orbit constellation of broadband satellites with Eutelsat’s GEO-orbit fleet, which includes several broadband satellites.

Eutelsat Chief Executive Eva Berneke, who will become executive director of the enlarged Eutelsat, said the goal is to merge, insofar as possible, Eutelsat’s GEO offering of high-throughput satellites with OneWeb’s LEO-orbit network’s low latency and global reach.

In a conference call with analysts, Berneke said Eutelsat, as OneWeb’s new owner with French government shareholders, would do all it could to persuade the European Commission that Eutelsat’s OneWeb should be involved in the Commission’s planned secure connectivity program.

Berneke said Eutelsat has been stitching a tighter relationship with OneWeb for the better part of two years, with the financial investments, a March 2022 global OneWeb service-distribution partnership and, announced July 26, a $275-million take-or-pay contract for OneWeb European and global maritime services over five years.

“This deal is in line with our long-held commitment to support OneWeb and step up when the occasion is right,” Berneke said. “The occasion is right now.”

She made no mention of the consequences on OneWeb of the Russian invasion, which stopped launches of OneWeb satellites on Russia’s Soyuz rockets. But industry officials said that was in fact the catalyst.

Bharti Chairman Sunil Bharti Mittal, who joined a Eutelsat press briefing July 26, thanked the U.S. and Indian governments for using their influence to assure early launches aboard the U.S. SpaceX Falcon 9 and Indian GSLV rockets, marketed by New Space India Ltd. (NSIL). These launches are to occur late this year and through next spring.

Russian government public statements about OneWeb since the cessation of OneWeb Soyuz launches brought the launch contract into a geopolitical context of Russia versus the West.

After jointly pulling OneWeb out of Chapter 11 bankruptcy in November 2020 with a $1 billion investment, the UK government and Bharti Global seemed to go separate ways on future investment.

Bharti doubled down with another $500 million, while the British government was content to retain its “golden share” without joining capital raises to complete OneWeb’s Gen 1 satellite constellation.

Eutelsat entered OneWeb’s equity, as did Korea’s Hanwha Group.

OneWeb and Bharti had said until early this year that the company had sufficient funding to complete the full Gen 1 deployment and progress on designing Gen 2.

The sudden shutdown of Soyuz launches meant OneWeb had to delay full commercial service until mid-2023, replace 36 satellites that were stuck in the Russian-run Baikonur Cosmodrome awaiting a launch that would not occur and find replacement launches.

Industry officials differ on the financial impact, with estimates of between $400 million and $600 million, depending on how many additional Gen 1 satellites will need to be built beyond the 36 still abandoned in Kazakhstan.

Eutelsat then made an offer that, under the new circumstances, OneWeb could not refuse.

The transition will be abrupt for Eutelsat shareholders, who have grown used to a high-dividend, low-risk play and now face at least a couple of no-dividend years as Eutelsat finances the transaction and attends to OneWeb’s Gen 1 and Gen 2 capex needs.

The agreement includes lockup for OneWeb’s major shareholders, meaning they cannot sell their Eutelsat shares until six months after the deal closes. Sunil Bharti Mittal, who will be vice-chairman of the combined company, said after that, shareholders are free to trade as they wish.

Some, he said, may want to increase their ownership of the new Eutelsat.

Key points of the Eutelsat-OneWeb transaction:

• The deal values OneWeb at $3.4 billion, the same value as when Hanwha Group made its investment. Berneke said OneWeb is worth more than this now. Each OneWeb shareholder will receive newly issued Eutelsat shares valued at 12 euros each.

Eutelsat will keep its Euronext Paris listing and seek a listing on the London Stock Exchange. OneWeb will retain its British offices and the UK government will retain its “golden share.”

• Eutelsat is forecasting that the addition of OneWeb, plus Eutelsat’s own broadband satellites, will result in double-digit increases in annual revenue over the next 10 years.

EBITDA will grow annually, also by double digits. Capex for the combined company is expected to be 725 million – 875 million euros ($725-$875 million) per year between fiscal-year 2024 and fiscal-year 2030, double Eutelsat’s current capex average.

Capex will exceed EBITDA until FY 2025 or 2026, depending on the phasing of Gen 2 introduction.

• Eutelsat expects 80 million in capex synergies starting in the first year of OneWeb ownership. Berneke did not fully explain where these savings would be made, beyond using Eutelsat’s GEO fleet to somehow make OneWeb’s Gen 2 more robust and needing fewer satellites. Eutelsat over time will be able to order fewer GEO-orbit satellites because of OneWeb, Berneke said.
• Bharti said OneWeb’s departure from Soyuz will require five launches of SpaceX and Indian GSLV rockets. Three SpaceX Falcon 9 launches will orbit what four Soyuz missions could do, he said. Soyuz carried 34-36 OneWeb spacecraft. Eutelsat did not discuss, nor was the question raised, of whether Eutelsat/OneWeb has recourse to recover some of the advance launch payments made to Europe’s Arianespace for the five final Soyuz launches.

Arianespace has cited force majeure for its inability to proceed with the Soyuz launches. But because the Arianespace-OneWeb contract was modified while OneWeb was in bankruptcy, the launch service provider insisted on receiving advance payment for the future launches.

In addition to the 36 OneWeb satellites stuck in Kazkahstan, there are two and one-half Soyuz rockets at Europe’s Guiana Space Center spaceport in South America that also have no clear future. Arianesapce has said legal title to these vehicles is with Russia’s Glavkosmos, Arianespace’s partner in conducting Soyuz launches.

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