Eutelsat/French government, SpaceX, UK government evaluating OneWeb takeover bids; a China card to play

by Peter B. de Selding

OneWeb satellite. Credit: OneWeb

PARIS — Satellite fleet operator Eutelsat of France, in what industry officials say is a move conducted on behalf of the French government, has secured access to OneWeb’s virtual data room with a view to a potential bid to take over OneWeb Global Ltd., now in Chapter 11 bankruptcy.

With two weeks left until an initial bid deadline set by OneWeb and its lead lender, SoftBank Group, the data room has also been accessed by SpaceX founder Elon Musk and by the British government, industry officials said.

OneWeb and SoftBank have told the bankruptcy court handling OneWeb’s Chapter 11 proceedings that they would get at least one SoftBank-acceptable non-binding bid for OneWeb’s assets by May 11, with all binding bids due by June 12.

Officials said the cast of characters now involved in the OneWeb Chapter 11 story includes the Chinese government, which has in the past expressed an interest in a joint satellite broadband effort with OneWeb; the U.S. Defense Department, whose interest in OneWeb concerns mainly Arctic coverage; and the European Commission.

Musk’s interest is likely catch-and-kill only: Submit a bid for OneWeb’s satellite frequencies for the sole purpose of shutting down the company and eliminating a competitor to SpaceX’s Starlink constellation.

Both OneWeb and Starlink have launched satellites but have not demonstrated much progress in the ground network, especially the user terminals to link consumers to the low-orbiting constellation; or on securing operating rights in the nations most likely to need their consumer broadband services.

The U.K. government’s interest is less clear. Britain is still searching for a future military satellite communications strategy following the current Skynet 5 satellites and, like the U.S. military, has evoked an architecture of smaller assets distributed in low Earth orbit as offering more resilience to adversaries’ threats.

Industry officials said the Chinese government has been interested in OneWeb, with the Chinese using the OneWeb license to put China’s own constellation inside OneWeb’s International Telecommunication Union (ITU) frequency reservation, a maneuver that could be conducted without violating the ITU rules.

A Chinese partnership in global satcom could be a help to OneWeb insofar as its Ku-band ITU reservation with the UK government’s Ofcom regulator is for 2,692 satellites:

OneWeb has until February 2023 to launch 10% of this constellation under its ITU filing. It has launched 74 satellites thus far.

OneWeb’s other regulatory home, for the Ka-band frequencies used for communications between the satellites and the network’s gateway Earth stations, is with France’s ANFR National Frequencies Agency.

French interest in OneWeb is multiple. Airbus Group is an 8.5% OneWeb equity holder and is 50% owner of Airbus OneWeb Satellites LLC, whose new satellite production facility Florida is building the OneWeb constellation.

As a UK company, OneWeb on its own is unlikely to win sizable U.S. government grants as part of the U.S. government’s Covid-19 bailout funding.

Any takeover by Eutelsat would almost certainly be accompanied by the closing of the Florida operations and the transfer of OneWeb’s satellite production to France.

France also has an interest in seeing OneWeb’s 22-launch contract with Arianespace, using 21 Russian Soyuz rockets and an Ariane 6 vehicle rot debut late this year. OneWeb listed the Arianespace launch service provider as its largest unsecured creditor, with up to $238.1 million in claims. Arianespace has conducted three of the contracted 22 launches so far.

Besides Arianespace, several French companies are heavily invested in OneWeb’s satellite supply chain.

China Investment Corp. (CIC) owns 6.7% of Eutelsat’s equity.

In January 2018 Eutelsat signed a cooperation agreement with China Unicom to use a Eutelsat satellite over East Asia to provide in-flight connectivity to commercial airlines in China and announced ambitions for a broader global partnership.

More recently, the Chinese government has approached OneWeb to sound out mutual interests, and in November OneWeb management toured Chinese installations to pitch OneWeb’s attractiveness as an investment:

None of the officials who commented for this story suggested that Eutelsat and China were collaborating on a OneWeb takeover. Instead, they said any bidder for OneWeb would survey prospective future customers and partners, starting with those that have already expressed an interest. The U.S. military is one. China is another. The two are mutually exclusive as the U.S. government would not be a major customer for a network in which China is a major participant.

Eutelsat has long said it does not believe in low-Earth-orbit satellite constellations as a viable architecture for satellite broadband. The company is launching its own large, geostationary-orbit high-throughput satellites for broadband in Europe and Africa.

French space industry officials have long urged European governments to prevent “U.S. domination” of broadband from low Earth orbit by investing in a European system.

Asked to comment about OneWeb, Eutelsat issued the following statement on April 27:

“As a matter of course, we review opportunities arising in our sector on an ongoing basis. Such assessments are conducted purely on the basis of their strategic rationale and value-creation potential. The current environment calls for particular prudence.”

Geopolitics, industrial policy first, business model later

Concerns about OneWeb’s ultimate viability as a business without massive government backing have taken a backseat to these political and industrial-policy considerations. Any new OneWeb owner, in addition to the cost of purchasing the company, would need to invest at least $2.6 billion to complete the constellation.

Industry officials were unanimous in saying that OneWeb’s interest to governments remains low so long as OneWeb is launching its relatively low-capacity first-generation satellites.

An architecture better tuned to government needs, including inter-satellite links, would be done on an accelerated timetable under every go-forward scenario now being considered.

Airbus OneWeb Satellites, which is not part of the Chapter 11 proceedings and remains operational, is competing for a contract, called Blackjack, from the U.S. Defense Advanced Projects Agency (DARPA) that would use up to two dozen OneWeb platforms as hosts for DARPA payloads.

DARPA would be unlikely to pursue a deal with OneWeb if OneWeb were to come under perceived Chinese ownership or operational control.

European Commission: Can DG-Connect pitch in?

The European Commission’s Directorate-General for Communications Networks, Content and Technology, DG-Connect, is another door on which Airbus has been knocking for potential financial support, officials said.

The commission has set a goal of providing broadband to all citizens in the 27-nation European Union but has no satellite strategy for rural areas as part of this goal. It has also set aside monies in its 2021-2027 budget — not yet approved by EU governments — for a milsatcom program to use existing assets in EU nations.

Whether the commission has disposable funds remaining in its 2014-2020 budget is unclear. Also unclear is whether the commission would be willing to invest in a UK-owned company given Britain’s exit from the EU.

And a commission involvement in OneWeb would have mixed appeal in Britain, whose government leaders reacted badly — also unfairly — to the commission’s decision to deny British businesses contracts for the active payload components on the Galileo positioning, navigation and timing satellite network.

“This whole thing is wheels within wheels,” said one industry official of the machinations around OneWeb.

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