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HMG to retain OneWeb national security guardrails

Deal still needs regulatory approval - and then there's the Russia thing...

The British government has welcomed a planned Eutelsat-OneWeb merger, two years after it bailed OneWeb out with £400 million of public money saying the UK will retain “national security rights”.

HMG today (July 26) gave its blessing to the deal  – news of which broke over the weekend – saying it was “positive news for taxpayers”. Along with a national security veto, the UK will also keep its first-preference rights to OneWeb launches and procurement, and will gain a seat on French firm Eutelsat’s board.

“Having made a $500m investment in OneWeb 2 years ago, the UK Government will now have a significant stake in what will become a single, powerful, global space company... The UK government will retain the special share and its exclusive rights over OneWeb – securing the company’s future at the centre of the combined group’s global LEO business, national security controls over the network, and first-preference rights over domestic industrial opportunities" BEIS said early Tuesday on behalf of the government.

The deal would marry OneWeb's 428 LEO satellites (it plans to have a total fleet of 648) and Eutelsat's 36 GEO satellites serving broadcasters, video service providers, telcos, ISPs and government agencies

Eutelsat-OneWeb deal gives UK’s “sovereign” space play a French flavour

OneWeb’s largest shareholder and executive chairman, Sunil Bharti Mittal, is also on board.

In a statement he said the deal represents “a very exciting opportunity in the fast-growing satellite connectivity segment”. CEO Neil Masterson said this was “another bold step in OneWeb’s remarkable journey”.

In a much more detailed announcement than yesterday’s cautious acknowledgement of the takeover talks from Eutelsat, OneWeb said this week that the deal valued the firm at €3.4 billion, representing around a 20% premium on its valuation when the UK bailed it out. OneWeb also suggested the merger could deliver €1.5 billion in net “incremental value creation”, through revenue, capex and cost synergies.

Eutelsat also announced its full-year results today, with revenues down 6.7% at €1.15 billion, but operating income up 22% at €424.8 million, and a stable EBITDA margin at 74.8%. Out of all its market segments, only Eutelsat’s fixed broadband and mobile connectivity revenues were up, growing 36% and 15% respectively.

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According to the UK government statement, the newly-merged firm will apply for a listing on the London Stock Exchange, in addition to Eutelsat’s existing listing on the Euronext Paris exchange.

The deal is still not confirmed, requiring approval from Eutelsat’s shareholders, including the French government. News of the takeover sent Eutelsat’s share price down almost a quarter from its opening price on Monday, at time of writing.

Regulators in OneWeb and Eutelsat’s markets will also need to approve the takeover – with the Chinese government’s 5% stake in Eutelsat presenting a potential stumbling block. The deal will also need to clear the provisions of the UK’s National Security and Investments Act, although presumably the government feels this is likely, given its public backing. One prominent issue which may need to be resolved is Eutelsat’s broadcasting operations within Russia. Last month the firm agreed to stop rebroadcasting several state-owned channels, but its activities in Russia have been under scrutiny for some time.