OneWeb says no steam lost despite Intelsat merger unravelling

by

MT LAUREL, New Jersey — OneWeb says that the now near-certain collapse of its planned merger with Intelsat has by no means slowed any of the company’s progress, and that other geostationary satellite operators have already expressed interest in taking Intelsat’s place.

Intelsat bonders had until midnight May 31 to agree on the terms of a debt exchange conditional to the merger, whereby Japanese conglomerate SoftBank would have invested $1.7 billion in the company and green-lighted a merger agreement with OneWeb. After three deadline extensions, including one that introduced more favorable exchange terms, bondholders passed on the deal.

In a June 1 statement, Intelsat said it “expects that OneWeb and SoftBank will exercise their respective termination rights under the Combination Agreement and related Share Purchase Agreement on June 2,” following Intelsat’s termination of the debt exchange today.

Greg Wyler, OneWeb’s founder, told SpaceNews June 1 that while Intelsat was a “great partner,” it also had a “list of challenges” that complicated the merger, but not OneWeb’s progress.

“We are extremely focused on the major events that are unfolding for us, which include inauguration of our first production line on June 27, the first finished satellites coming off that line in October, and the launch of our first production satellites in March of next year,” he said. “These are major milestones and we are hyper-focused on those.”

OneWeb is building a first generation constellation of around 900 satellites in low-Earth orbit, followed potentially by a 2,000-satellite second generation constellation. Wyler said the first system will have seven terabits per second of capacity and will enable the company to reach rural and unserved populations around the world.

Wyler said there has been a “demonstration of appetite,” by other geostationary satellite operators in supplanting Intelsat as a buyer. OneWeb and SoftBank are willing to entertain those conversations, he said.

“If there are opportunities which are accretive, which help increase the growth rate of OneWeb, then we will seriously look at them,” said Wyler.

Bloomberg reported May 31 that SoftBank had already engaged Inmarsat in conversation about OneWeb, and that SES and Telesat were other potential partners.

In a prepared statement, Intelsat CEO Stephen Spengler said that while the company was “disappointed that our bondholders were unwilling to accept the terms of the exchange offers,” that Intelsat, OneWeb and SoftBank will continue to work together through a preexisting commercial agreement.

“Under this agreement, we plan to jointly develop integrated solutions utilizing both of our fleets and to act as a sub-distributor to SoftBank for the attractive application segments of mobility, energy, government, and connected car,” he said. “As we create integrated services for these applications, we expect to accelerate and enhance our goal of unlocking new and larger opportunities in the communications landscape.”

Intelsat’s merger with OneWeb would have been the operator’s largest M&A move since purchasing Panamsat in 2005, a move that rocketed the company to becoming the largest fixed satellite services operator in the world with some 53 geostationary satellites. Last year Intelsat and competitor SES, which  both have more than 50 geostationary satellites, tied for revenue

The combined debt swap and $1.7 billion SoftBank investment would have reined in Intelsat’s roughly $14.5 billion debt (as of March 31) by around $3.6 billion.

OneWeb already has $1.7 billion in investor capital thanks to a $1.2 billion financing round in December 2016, of which SoftBank, invested $1 billion, and a $500 million financing round in 2015, through which Intelsat invested $25 million.

Wyler said the first two satellites, to be produced in France by OneWeb Satellites, a joint venture of OneWeb and Airbus Defence and Space, will be pilot models meant to test the manufacturing processes. OneWeb plans to test those satellites extensively, he said, including disassembling them and reassembling. Wyler said OneWeb doesn’t currently plan to launch those satellites, but could change that. After the first two, OneWeb Satellites will begin larger production.

“Once the line is turned on, the next 10 should be assembled at a much faster pace, and, assuming that goes well, will be ready for our first launch in March,” he said.

OneWeb is launching its first 10 satellites on Soyuz rockets from Arianespace. Virgin Orbit and Blue Origin also have launch contracts. Wyler said the main launch campaign begins in earnest in 2018. OneWeb also intends to have its satellite operations center and network operations center completed late this year, he said.

Dianne VanBeber, Intelsat’s vice president of investor relations and corporate communications, told SpaceNews that for Intelsat,”incorporating LEO services with our GEO fleet remains part of our long term technology roadmap.” She said the commercial agreement between Intelsat, SoftBank and OneWeb “includes the two companies collaborating to find interoperable terminals, and a way to combine both the LEO and GEO services into a combined service offering.”