Intelsat OneWeb Graphic
Intelsat, following a conditional $1.7 billion investment from Japanese conglomerate Softbank, has reached a merger agreement to combine with OneWeb. Credit: Intelsat

WASHINGTON — Global satellite operator Intelsat, following a conditional $1.7 billion investment from Japanese conglomerate Softbank, has reached an agreement with OneWeb to form one company offering telecommunications services from geostationary and low Earth orbits, the companies announced Feb. 28.

The Softbank investment is conditioned on Intelsat’s ability to convince enough of its bondholders to participate in a debt swap that, when combined with Softbank’s cash infusion, would shave at least $3.6 billion off Intelsat’s roughly $15 billion debt — assuming at least the minimal level of participation in the debt exchange.

Intelsat CEO Stephen Spengler, in a Feb. 28 conference call with investors, said Intelsat’s 2015 investment in OneWeb was beneficial to Intelsat but fell short of addressing all the target broadband applications the operator has in mind for the future. Spengler said IT traffic is predicted to triple every three years, and that OneWeb will help it capture that business along with new opportunities presented by growth in the connected car and the Internet of Things markets.

“[In 2015] we immediately saw the complementarity between our GEO fleet and the OneWeb LEO fleet, and as we move to this new combined company, what we are really looking at is not just GEO working with LEO, but being completely interoperable in a single network,” he said. “It allows us to architect this solution as one company into a fully integrated network in space and on the ground, and it allows us to both capture the shared vision and accelerate our business plan to deliver broadband everywhere affordably.”

OneWeb, with Intelsat as an investor, raised $500 million in 2015 to field a constellation of 648 small, high-throughput satellites (HTS) to bring internet access to the estimated 4 billion people without it. In December, OneWeb raised $1.2 billion, with $1 billion coming from Softbank, which now owns 43 percent of the company.

In a presentation accompanying Intelsat’s Feb. 28 earnings call, OneWeb now lists its initial fleet size at 882 satellites. Last week, OneWeb founder Greg Wyler disclosed that the company is considering around 2,000 more.

Speaking on the same investor call Feb. 28, Wyler said joining Intelsat gives OneWeb access to Intelsat’s sizeable customer base to offer LEO-HTS services.

“Now, what we will be able to do is offer all the customers a direct, clean upgrade path,” he said. “They will know that this [combined] company is taking care of all their future needs, and they can focus on other things and let the data be served to them.”

Having GEO capacity will also enable OneWeb to offer point-to-multipoint services, such as video distribution and software upgrades to vehicles and devices.

“We are in the midst of a technological revolution and, provided we receive the necessary cooperation from Intelsat bondholders, we welcome the opportunity to support OneWeb as it creates the foundation for next-generation global internet services anywhere on the planet,” Masayoshi Son, chairman and CEO of SoftBank, said in a prepared statement. “This combination is consistent with SoftBank’s strategy of investing in disruptive, foundational technologies that are building the infrastructure for tomorrow, and this proposal offers a win-win opportunity to accelerate OneWeb’s mission while enhancing the Intelsat balance sheet.”

Through the $1.7 billion investment, Softbank will gain a 39.9 percent voting stake in the combined company. Spengler would be CEO, and Wyler the executive chairman.

SoftBank is holding the right to terminate its investment if Intelsat cannot successfully complete its debt exchange offers within 90 days of the date of the agreement. Furthermore, Intelsat’s merger with OneWeb and the investment by Softbank are all cross-conditioned on each other.

Jacques Kerrest, chief financial officer of Intelsat, said the operator expects to complete the debt offers in March, and anticipates closing the merger and investment during the third quarter of 2017 after customary regulatory approvals.

Caleb Henry is a former SpaceNews staff writer covering satellites, telecom and launch. He previously worked for Via Satellite and NewSpace Global.He earned a bachelor’s degree in political science along with a minor in astronomy from...