UK government buys chunk of bankrupt Starlink competitor, OneWeb

UK government buys chunk of bankrupt Starlink competitor, OneWeb

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Spacing out broadband —

Goal: launch global commercial Internet service focusing on remote areas by 2022.

Peggy Hollinger, Financial Times

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The UK has entered the increasingly competitive race to become a global satellite Internet provider after taking control of failed space startup OneWeb with Indian billionaire Sunil Bharti Mittal.

The low-Earth-orbit-satellite operator emerged from Chapter 11 bankruptcy protection on Friday and will now seek a further $1.25 billion through debt or equity to achieve its ambitious medium-term goal of launching a global commercial Internet service by 2022 focusing on remote areas.

It will face well-funded rivals, including ventures led by SpaceX’s Elon Musk and Amazon’s Jeff Bezos.

The UK government, which will have a golden share in OneWeb, and Mr. Mittal’s Bharti Global are each paying $500 million for 84.4 percent of the company. The balance will be owned by existing creditors, including SoftBank and Airbus.

Neil Masterson, former co-chief operating officer of Thomson Reuters, is taking over as chief executive. The UK government and Bharti Global will each have three representatives on the board, and there will be three independent directors.

OneWeb’s emergence from Chapter 11, a process distressed businesses use to reorganize themselves, gives a significant boost to the UK’s ambitions to become a major commercial space player and to develop cutting-edge positioning technology that could be used to cement international security alliances.

“This deal gives us the chance to build on our strong advanced manufacturing and services base in the UK, creating jobs and technical expertise,” said Alok Sharma, business secretary.

The Satellite Applications Catapult, a government-funded innovation hub, is already working with OneWeb to develop positioning, navigation, and timing technology that could be used to enhance the resilience of existing navigation services such as GPS.

The initial focus will be to deliver a viable commercial Internet service to the UK and the Arctic region by autumn next year.

The company was one of the earliest to propose a mega-constellation to deliver Internet to remote parts of the world, but SpaceX’s Starlink constellation already has about 800 satellites in low Earth orbit against OneWeb’s 74.

Nevertheless, in its reincarnated form, OneWeb would increase its focus on business customers, helping it to compete, said Chris Quilty, analyst at Quilty Analytics, a space-industry advisory company.

“The two have elected different paths, with Starlink focusing on the consumer market and OneWeb focusing on enterprise customers,” he said. “SpaceX has developed lower-cost hardware for the consumer market but must still subsidize it, even at a $450 price point. OneWeb’s enterprise customers can expect to pay thousands—or tens of thousands—of dollars for the hardware but can expect to receive higher bandwidth.”

OneWeb intends to launch 36 more satellites on December 17 and will accelerate launches next year to complete its target of having 650 satellites in orbit by 2022 for its global coverage.

Mr. Mittal, whose Bharti Airtel is one of the world’s biggest telecom companies, told the Financial Times he was confident the funding would be available to complete the launches. He told staff in a call on Friday that one investor had offered $700 million, but he told the FT that the group was also looking at taking on debt.

He added that $3.3 billion had already been invested before the group collapsed in March after a failed fundraising. OneWeb’s assets included regulatory priority over rival low-Earth-orbit constellations for broadcasting services and a satellite manufacturing facility in Florida.

“A rewarding investment”

“I see no difficulties [in financing],” Mr. Mittal said. “In the hands of new investors, this constellation will be ready for commercial service at $2.25 billion [including the $1 billion committed by the new shareholders] and that will be the cheapest constellation compared to anyone in the world. I can confidently say this will be a rewarding investment.”

The UK government’s decision to invest in OneWeb—against the advice of senior civil servants—has been controversial, prompting criticism from MPs about the use of taxpayer money to rescue a failed company.

It also drew significant opposition from the government’s own UK Space Agency, which had been committed to developing a standalone global navigation satellite service after the EU barred British access to secure elements of its Galileo initiative. This project has now been shelved due to the high cost of developing an independent navigation service from scratch.

As a communications constellation, OneWeb cannot deliver identical navigation services to GPS or Galileo. But it could be a resilient alternative, according to experts, and be offered to partners in security alliances such as the Five Eyes intelligence group of the UK, US, Canada, Australia, and New Zealand, to augment existing services.

Chris McLaughlin, who helped to orchestrate the deal as a special adviser to OneWeb, said the UK government had acquired a foothold in an industry that would provide “options for decades to come.”

“A sovereign nation needs a sovereign space capability,” he added. “Buying OneWeb secures that at a fraction of the cost of starting from scratch.”

Wielding its golden share, the UK government will have a say over who has access to the network. OneWeb will also be a vehicle to jumpstart UK space ambitions for its space industry. It is expected to manufacture the payloads for the next generation of satellites—which will have substantially more capability than the current generation—in the UK from about 2023.

© 2020 The Financial Times Ltd. All rights reserved Not to be redistributed, copied, or modified in any way.

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