The UK and France will get seats on the board of the Eutelsat and OneWeb link scheme

Both the British and French governments will have a seat on the board of a new satellite operator that aims to take on billionaire entrepreneurs Elon Musk and Jeff Bezos under the terms of the merger floated Sunday between Eutelsat and OneWeb.

Paris-listed Eutelsat and OneWeb, the satellite internet company that was rescued from collapse by a billion-dollar British-led bailout in 2020, are close to agreeing on a package deal aimed at creating a company with the financial strength to compete in the fast-growing market for satellite communication.

The merger will meet Eutelsat’s need for new growth to offset the decline in the satellite video business and OneWeb’s requirement to invest between $2 billion and $3 billion to complete its network and modernize its technology, according to people close to the deal.

The agreement could also help revive cooperation between Brussels and London on space projects after disagreements over a post-Brexit deal damaged relations. Tensions over the Northern Ireland Protocol governing trade between the province and the rest of the United Kingdom led to a confrontation over issues such as the United Kingdom’s participation in Copernicus, the Earth Watch programme.

People close to the deal warned that while many issues had been resolved, a final agreement had not been reached by Sunday evening. But many are expecting a deal to be revealed as early as Monday.

Under the terms under discussion, Sunil Bharti Mittal, the current chairman and largest shareholder of OneWeb through the Bharti Group International, is expected to be the co-chair of the combined company. Bharti will own a stake of about 18 percent, according to two people familiar with the deal.

Eva Pernik, the current CEO of Eutelsat, is expected to remain in her position.

The British and French governments are expected to have similar quotas of about 10 per cent and one seat each. France’s stake will be acquired by Banque Publique d’Investissement, a state-backed business development bank.

Britain will also keep its gold stake in OneWeb, giving it veto power over sales on national security grounds, rights over the headquarters site and over any technology transfer. France will also receive guarantees regarding the headquarters of Eutelsat.

OneWeb and Eutelsat declined to comment.

The deal is the culmination of a long-standing ambition by Eutelsat to more closely integrate OneWeb into its offering.

The French company acquired a 24 percent stake in OneWeb in 2021 and in March announced a joint marketing deal to provide its customers with Low Earth Orbit (LEO) capabilities for UK operators.

Dozens of companies around the world are racing to claim newly emerging commercial opportunities in low Earth orbit. Musk’s Starlink has already launched more than 2,000 satellites into low Earth orbit and is developing commercial service in many parts of the world. Project Kuiper of Jeff Bezos also plans to launch a huge constellation of satellites in the coming months.

Eutelsat also hopes the deal will encourage Brussels to consider OneWeb as the platform for the European Union’s proposal to build its satellite internet service from low Earth orbit. This was considered difficult under the previous ownership structure.

One analyst said that though, it’s a big gamble for Eutelsat and could pose challenges from investors.

“Eutelsat has approximately €500 million in free discretionary cash flow – most of which you could potentially spend on a project like OneWeb,” said Armand Moussi, founder of the advisory firm Summit Ridge Group. “The bottom line is that [traditional] The industry is in decline and Eutelsat seems to see OneWeb as a way to grow. It’s a very risky “farm bet”.

Another analyst said that could be politically “disingenuous”. Chris Quilty of Quilty Analytics said: “The UK government has viewed its investment in OneWeb as a way to advance UK sovereignty in space, but these goals can be included through Eutelsat ownership.” OneWeb’s ability to secure its Arctic communications contract with the US Department of Defense may also be at risk because “France is not a member of the Anglo Five Eyes security alliance.”

Officials said the deal values ​​the British government’s stake at about $600 million, a paper profit of $100 million.

The merger will absolve the UK government of any responsibility for the significant investment still required to complete the OneWeb business plan. Several senior officials expressed their satisfaction with the change of burden. Officials said Defense Secretary Ben Wallace was not in favor of the UK government buying a stake in the company in the first place.

“The Department of Defense was not planning to use it — we had no interest in it,” said one senior official. “Ben always thought it was a fantasy by Dominic Cummings [Boris Johnson’s former chief adviser] Because he was obsessed with space.”

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