OneWeb, the London-based satellite company partially bailed out from bankruptcy by the UK government, is set to merge with Paris-based Eutelsat.
The French company already held a 23% stake in the UK business.
The operators say the joint mission will give both partners a better chance of capitalizing on the business opportunities to come.
OneWeb is building a low-Earth orbit constellation to provide Internet broadband connectivity around the world.
Eutelsat operates 30 times higher in the sky in so-called geostationary orbit at an altitude of 36,000 km. It is one of the largest distributors in the world of direct-to-home TV.
“This transaction will provide a unique capability across the satellite industry through a fully integrated GEO/LEO offering,” said Eva Berneke, CEO of Eutelsat.
“It will provide customers with one-stop satellite connectivity. Our new business will be uniquely positioned in the rapidly growing connectivity market. That is estimated to be around €16 billion (£13.6 billion) by 2030.”
The merger has been described as a “fusion of equals”, although Eutelsat has a much longer tradition in terms of its pedigree, having originally started 45 years ago as a pan-European intergovernmental organisation.
OneWeb, on the other hand, has spent the last few years in start-up territory.
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The transaction is to be structured as an exchange of OneWeb shares by its shareholders (other than Eutelsat) for new shares issued by Eutelsat such that, at closing, Eutelsat would own 100% of OneWeb (barring a “gold share” issued by the UK Government ).
OneWeb shareholders would receive 230 million newly issued Eutelsat shares, representing 50% of the expanded share capital.
The companies will retain their names for their part of the joint business, as well as their respective headquarters in the capitals of France and the UK.
The aim is to be listed on both the Paris and London stock exchanges.
The deal requires regulatory approval, but if all goes well, the transaction should close in early 2023.
Commentators say the merger makes sense for both sides.
Eutelsat has been working for some time to diversify from its traditional video markets, which are largely stagnant, and to enter broader connectivity sectors that have better growth potential — for example, connecting aircraft, ships and remote or mobile customers.
For OneWeb, it will benefit from having the cash-raising potential of its older sibling. The London Outfit will need money to continuously update and expand its LEO constellation.
For its first generation, it’s aiming for 650 satellites for global coverage, but ultimately it will aim to reach 7,000 in later iterations.
“Two thirds of the (Generation One) fleet are already in use. And right now, most of the satellites needed to complete the constellation are actually being manufactured,” said OneWeb Managing Director Neil Masterson.
“Gen One is fully funded; we have already raised 6.3 billion euros. And Gen Two, which is currently under review, will offer much more capacity at a significantly lower cost.”
OneWeb has been frustrated in its efforts to roll out the Gen One satellites after losing access to Russian Soyuz rockets.
When the West imposed sanctions on Russia for its invasion of Ukraine, Moscow pulled the Soyuz vehicles from the market and let OneWeb look for alternative rides.
It has now signed several launch providers, the most notable of which is California-based SpaceX, which happens to be building its own broadband constellation, Starlink.
The UK government invested $500m (€490m; £420m) in OneWeb with a view to getting it out of bankruptcy in 2021.
Its gold stock gives it certain vetoes on what happens to the company, but like all of OneWeb’s current shareholders, it has approved the merger with Eutelsat.
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