Eutelsat and OneWeb share financials underpinning planned merger

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TAMPA, Fla. — Eutelsat would nearly double annual sales in five years to around $2 billion if its OneWeb merger gets approved, the satellite operators said Oct. 12 as they disclosed financials underpinning their multi-orbit deal.

U.K.-based OneWeb’s non-geostationary (NGSO) network is key to competing in a satellite connectivity market that is projected to more than triple to $16 billion by 2030, according to Eutelsat CEO Eva Berneke.

Berneke said about half this future market will be captured by the NGSO sector, where she believes OneWeb’s low-latency services will have an edge by tapping into Eutelsat’s higher-bandwidth satellites in geostationary orbit (GEO).

Eutelsat announced plans in July to take over OneWeb in an all-share transaction valuing the British startup at $3.4 billion.

French investment bank Bpifrance and other top shareholders in publicly listed Eutelsat have voiced support for the deal, alongside OneWeb shareholders including Bharti, SoftBank, Hanwha, and the British government.

However, the transaction requires permission from foreign investment authorities and other regulatory bodies, in addition to a Eutelsat shareholder vote to be held in the first half of next year. 

OneWeb financials 

OneWeb CEO Neil Masterson expects the startup to record $50 million in revenues for the 12 months to June 30, 2023 — the end of Eutelsat’s 2023 fiscal year — after recently launching commercial services.

The startup is the world’s second-largest satellite operator behind SpaceX’s Starlink NGSO broadband constellation, and has 428 of a planned 648 satellites in orbit, enough to provide coverage in the upper part of the northern hemisphere.

Masterson said OneWeb is set to deploy its remaining satellites in half a year after resuming its suspended launch campaign later this month. Global services are slated to start commercially in 15 months.

According to OneWeb, it has made $21 million in sales to date from North America.

Following the start of global services, OneWeb expects to record between $150 million and $250 million for Eutelsat’s 2024 fiscal year.

Revenues are projected to come in between $300 million and $500 million the following year, and exceed more than $600 million the year after.

The NGSO operator has signed nearly $700 million worth of customer contracts, Masterson said, which includes $275 million under commercial partnerships with Eutelsat.

Materson also pointed to a $1.9 billion “risk-weighted pipeline” of potential deals across enterprise, government, aviation, and maritime markets with more than 150 customers trials are underway.

OneWeb has been investing heavily to deploy a constellation estimated to cost $5 billion in total, although its current shareholders have only provided about $2.7 billion of this after taking ownership following its 2020 bankruptcy.

Srikanth Balachandran, OneWeb’s chief financial officer, said the operator will spend a final $500 million over the next 12 months to cover the constellation’s remaining costs.

He estimated OneWeb has made a $198 million loss over the last 12 months in EBITDA, or earnings before interest, taxes, depreciation and amortization.

The operator expects to reach EBITDA break-even by the end of June 2025.

Eutelsat connectivity growth

Eutelsat expects the combined company to generate about $1.2 billion for its 2023 fiscal year ending June 30, and then grow in double digits annually to about $2 billion for fiscal year 2027.

Combined EBITDA would outpace revenue growth, the company said, rising from around $700 million in fiscal year 2023 to about $1.4 billion in fiscal year 2027.

The companies expect to capture about $150 million in average annual revenue synergies four years after closing the deal by integrating services and products, including future hybrid terminals that would connect to both constellations.

They said Eutelsat’s expertise and resources would also accelerate OneWeb’s commercial launch and the ramp-up of its services globally.

Five years after closing the deal, the operators expect to realize an average $80 million in annual run-rate pre-tax cost synergies by avoiding duplicated efforts. This includes personnel, although the companies said no layoffs are needed to achieve this target.

Eutelsat and OneWeb also expect about $80 million in average annual capital expenditure synergies from the first year of their merger as they rationalize their future satellite fleets.

They have already started work on planning the NGSO operator’s second-generation constellation, which they expect to cost $4 billion and to enter service by early 2028.

Eutelsat already owns 23% of OneWeb after building up a stake in the business to bolster connectivity services amid a gradual decline in its legacy satellite TV business.

The French operator said during financial results released Oct. 12 that it is extending its no-dividend policy another 12 months to three fiscal years to support investments.

The company reported 287 million euros ($279 million) for the three months to the end of September, down 4.5% compared with the same period last year on a like-for-like basis when adjusted for foreign exchange rates.

Broadcast revenues fell 7.4% to 170 million euros. Sales from fixed broadband and mobile connectivity jumped 21.1% and 31.4%, respectively, to about 19 million euros and 26 million euros.

Eutelsat reported 1.15 billion euros in revenues for the year to the end of June, down 6.7% compared with the period the year before.

Berneke said Eutelsat and OneWeb have filed most of the applications needed to get their merger approved by regulators, and expect to secure permission for the transaction in five to six months.