Eutelsat and OneWeb combine to create European satellite giant as Musk’s Starlink pressures sector

Eutelsat and OneWeb combine to create European satellite giant as Musk’s Starlink pressures sector

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OneWeb, the British satellite giant, completed its combination with French rival Eutelsat Thursday, setting the stage for a European challenger to Elon Musk's space internet venture Starlink.

The two companies said in a joint statement that they had completed their all-share combination, which will see OneWeb's constellation of low-earth orbit (LEO) satellites added to Eutelsat's geostationary orbit (GEO) satellites.

It comes as competition is heating up between different players in the multibillion-dollar space industry. Analysts at investment bank Morgan Stanley have previously estimate the global space industry could be worth more than $1 trillion by 2040, up from about $550 billion currently.

Eutelsat shares rose about 3.5% on news of the deal Thursday.

Eutelsat counts the likes of Telecom Italia, Orange, and Deutsche Telekom as customers and caters primarily to large enterprises rather than consumers. Likewise, OneWeb also targets enterprise customers, but offers a different service capability thanks to its LEO network – similar to SpaceX's Starlink satellite internet. Starlink initially focused on consumers, but has since entered enterprise markets that OneWeb targeted.

Eutelsat said that the newly formed group was strategically positioned to be a global leader in space communications. The company wants to combine its network of density and high throughput GEO satellites with the low latency and ubiquity offered by OneWeb's LEO constellation.

Eutelsat will remain headquartered in Paris, and OneWeb will continue operating in London with its name changed to Eutelsat OneWeb. Eutelsat is listed on the Euronext Paris Stock Exchange but has applied for a secondary listing on the London Stock Exchange.

Eva Berneke, appointed as CEO of Eutelsat in January 2022, will continue to serve as the group's chief executive. The merger announcement made no reference to OneWeb CEO Neil Masterson, who has led the company since November 2020. A person familiar with the matter told CNBC that Masterson will leave Eutelsat Group at the end of this year.

Commercial deals are gaining traction in the space industry, with Musk's Starlink service working alongside businesses including Spain's Telefonica and French firms Marlink and Speedcast.

Earlier this month, SpaceX partnered with European satellite operator SES to offer a combined service to cruise operators. SES will manage the joint offering, called SES Cruise mPOWERED + Starlink, as a service that it says will provide high-speed, reliable internet service to cruise ships, regardless of whether they're clustered in port or far out at sea.

Some Eutelsat investors had expressed opposition to the OneWeb deal — not least because it will likely result in Eutelsat ceasing dividend payments to shareholders as it makes big growth investments. Defending the deal in an interview with CNBC's Arjun Kharpal in June, Berneke said it marked a big bet that would see Eutelsat transition to a high-growth company.

A lot of especially the shareholders who are there, who like the annual dividend are saying maybe we'll take our time and money elsewhere, and go there [but] we have another set of shareholder coming in, Berneke told CNBC in an interview at the Viva Technology conference in Paris.

[Bpifrance] is very supportive of the deal, who is also Eutelsat's biggest shareholder today. We've seen CMA CGM, which is a big French shipping company, picking up 10% of the shares because they say we need a global network for digitizing our maritime fleet. If we are ever to fully digitize our vessels, we need a network that's already on and is there all the time.

It follows difficulties at OneWeb in turning its lofty ambitions into a viable economic model.

The company emerged from bankruptcy in 2020 with the help of the U.K. government, having burned through billions of dollars in venture capital. The government kicked in $500 million as part of a bailout package for the firm.

The startup was also impacted by a freeze on rocket launches from Russia following Moscow's invasion of Ukraine, and was forced to turn to SpaceX for support.

Since then, Eutelsat emerged as an acquirer for the company, stepping in to take over the company in a $3.4 billion all-share combination.

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