Engineers monitor transmissions both visually and via an automatic control system at Eutelsat's Communications System Control Centre. Credit: Adrien Daste / Eutelsat (2021)

TAMPA, Fla. — A search for companies to build OneWeb’s second-generation constellation could kick off by summer, French satellite operator Eutelsat said Feb. 17 as it closes in on buying the British venture.

A request for proposals will “most likely” be issued in the three months to the end of June, Eutelsat CEO Eva Berneke said during financial results, enabling launches to start in 2025 or 2026 for a low Earth orbit (LEO) network estimated to cost $4 billion.

The companies previously said they have reserved launch options to cover most of Gen 2’s needs, including new rockets being developed by Arianespace, Blue Origin, and Relativity Space.

Replenishment plans for OneWeb’s current generation of 648 proposed satellites only extend the constellation’s lifespan to 2027 or 2028, Berneke added.

While Gen 2 specifications have not been finalized, the next-generation constellation is expected to enable faster speeds and denser coverage with far more satellites.

OneWeb has so far deployed 542 satellites. SpaceX and India’s space agency are each planning to launch a batch of satellites around the end of this month and early March, Berneke said, giving OneWeb global coverage once they become fully operational by January 2024.

Meanwhile, she said the French geostationary satellite operator is making good progress in getting the final regulatory approvals it needs in France and the United States to buy OneWeb under a merger deal announced last year.

Unlike U.S.-based Viasat’s plan to buy British operator Inmarsat, Eutelsat and OneWeb’s deal was not flagged by Europe for an investigation into how their merger could reduce competition in the market for satellite services.

“I think we haven’t had any questions on a regulatory level that were not perfectly normal,” Berneke said.

“We don’t have an overlap between OneWeb’s market today and Eutelsat. We’re in different orbits and we don’t have competing capacities.” 

However, she highlighted “a need to fully understand the satellite market, given that especially the constellation market is fairly new to regulators.”

Eutelsat expects to wrap up its OneWeb deal in the second or third quarter of this year, assuming Eutelsat’s shareholders also vote to approve the transaction.

Connectivity pivot

OneWeb was a bright spot in financial results that were once again dragged down by business in a declining market for satellite TV.

Eutelsat recorded 574 million euros ($614 million) in total revenues for the six months to the end of December 2022, down 6.1% compared with the same period in 2021 when adjusted for currency changes on a like-for-like basis.

In contrast, fixed broadband revenues increased 17% to 37 million euros while sales of mobile connectivity services jumped 33% to 56 million euros.

Government revenues plummeted 20% to 67 million euros following U.S. Department of Defense non-renewals.

However, sales from broadcast activities representing 58% of Eutelsat’s total revenue fell 6.7% to 339 million euros.

Sanctions on Russian and Iranian channels are compounding Eutelsat’s broadcast woes, and the company expects they will cause a “slight deterioration” in revenues for the six months to the end of June as they start to bite.

In addition to buying OneWeb, Eutelsat has been heavily investing in geostationary communication satellites as part of its pivot toward connectivity services.

Two of the four satellites launched for Eutelsat in the second half of 2022 focus on broadband markets: Konnect VHTS and Eutelsat 10B.

Eutelsat said it is seeing strong take-up of these satellites as it projects a return to profitability in its next fiscal financial year that starts July 1.

Connectivity sales now represents 30% of revenue from all its operating verticals revenues, Berneke said, versus 25% four years ago.

However, a side effect of Eutelsat’s connectivity push is a reduction in longer-term contracts that are more typical with broadcast customers.

Eutelsat said its backlog of revenues stood at 3.7 billion euros at the end of 2022, compared with 4.2 billion the previous year.

The backlog does not yet include managed services, Berneke noted, adding that the company is looking into a way to include this in its accounts.

Eutelsat’s connectivity pivot also puts the company in a better position for contributing to IRIS², Europe’s proposed multi-orbit secure connectivity constellation that recently got the regulatory go-ahead.

Berneke expects Europe will issue a tender for developing the constellation in mid-March.

She said there “are a lot of discussions going on left, right, and center in the European space industry” to strike partnerships that could support the constellation.

“I think satellite operators are all very interested to be involved,” she said, and Eutelsat “certainly hope to be part of consortiums where you also see satellite operators.

“But I think your guess is as good as mine in terms of what Europe will be coming out with” in the coming weeks.

Eutelsat recorded 419 million euros in adjusted earnings before interest, taxes, depreciation, and amortization for the six months to the end of December, down 3.8% compared with the same period in 2021.

Jason Rainbow writes about satellite telecom, space finance and commercial markets for SpaceNews. He has spent more than a decade covering the global space industry as a business journalist. Previously, he was Group Editor-in-Chief for Finance Information...