Keen competition may be building up in the growing broadband internet market following the advance talks for merger by French and British satellite operators Eutelsat and OneWeb to create a stronger firm to rival U.S giants.
Elon Musk’s Starlink is one of the giants in the U.S and it has now forayed into the Nigerian market where it is expected to commence operation by August.
Eutelsat and OneWeb in a joint statement had signed a memorandum of understanding to merge to become “a leading global player in connectivity… in an all-share transaction”.
Highlights of the MoU show each company would hold a 50-percent stake in the combined entity while the transaction would be structured as an exchange of OneWeb shares by its shareholders with new shares issued by Eutelsat.
Satellite broadband promises to bring coverage to the most remote areas of the planet by doing away with the need for antennas and other infrastructure and Eutelsat said the market was projected to grow to $16 billion by 2030.
In what they said would be “a game-changer in the industry”, Eutelsat would combine its 36-strong fleet of geostationary Earth orbit (GEO) satellites with OneWeb’s constellation of 648 low Earth orbit satellites (LEO), of which 428 are currently in orbit.
GEO satellites orbit thousands of kilometres (miles) from Earth and are more commonly used for TV and other communications, while LEO satellites are smaller and orbit just a few hundred kilometres above the Earth.
“This ground-breaking combination will create a powerful global player with the financial strength and technical expertise to accelerate both OneWeb’s commercial deployment, and Eutelsat’s pivot to connectivity,” said Eutelsat chief executive, Eva Berneke.
“The combined entity will be geared towards profitable growth” with a potential for “double-digit” increase in both sales and profit “over the medium to long term”, both companies said.
“This combination accelerates our mission to deliver connectivity that will change lives at scale and create a fast-growing, well-funded company which will continue to create significant value for our shareholders,” said OneWeb CEO, Neil Masterson.
The deal valued OneWeb at 3.4 billion euros ($3.5 billion), implying a value of 12 euros per Eutelsat share, the statement said.
The transaction was subject to clearance from relevant regulatory authorities and was expected to close “by the end of first half of 2023”.
Eutelsat already holds a 22.9-percent stake in OneWeb.
The British operator’s other shareholders are Indian conglomerate Bharti with 30 percent, the British government with 17 percent, Japan’s Softbank with 17.6 percent and South Korean conglomerate Hanwa with 8.8 percent.
Eutelsat, for its part, is 20 percent owned by French state-run investment bank Bpifrance, and a fund held by seven insurers, with the remainder of the share capital in free-float.
While the market is rapidly expanding, European firms face stiff competition.
Musk is not the only tech billionaire with plans to dominate the market. Amazon founder Jeff Bezos recently announced he intended to launch some 3,200 satellites.
Money is pouring into the sector, with Bezos apparently pledging $10 billion to his so-called Project Kuiper.
Public institutions are also looking to get in on the act.
China has a plan to launch a constellation of 13,000 satellites called Guowang and the European Union wants to deploy roughly 250 by 2024.
EU Internal Market Commissioner Thierry Breton said the satellites would help eliminates gaps in coverage, offer redundancy in case of cyberattacks on ground networks and also provide for encrypted communications by European governments.
Analysts say low-orbit constellations are a market which could potentially become strategic for governments.
And the UK’s Financial Times newspaper reported that both the French and British governments would have board seats at the combined Eutelsat-OneWeb company.
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