OneWeb’s March 27 bankruptcy filing was equal parts surprising and expected. Over the past two years, SoftBank, OneWeb’s largest backer, had emphasized its willingness to play the long game, knowing it would take many years for OneWeb to generate revenue, let alone profits.
“We will invest massively in return for what we think will be massive returns over the long run,” Alex Clavel, SoftBank’s managing director, said at the Satellite 2018 conference. “Is this a near-term ‘let’s build this thing and try to sell it?’ Couldn’t be further from the truth.”
SoftBank didn’t sell OneWeb, but the Japanese tech conglomerate’s refusal to invest more than $2 billion in the company drove OneWeb to put itself up for sale, or, more specifically, its spectrum.
OneWeb now expects to have one or more binding spectrum bids by June 12, with a court-approved auction by June 22.
OneWeb blamed the coronavirus pandemic for its bankruptcy, which halted deployment of a 648-satellite constellation after only launching 74 satellites. Thomas Whayne, OneWeb’s chief financial officer, said in a March 27 bankruptcy document that the company believed just two weeks prior to filing for Chapter 11 protection that its existing shareholders would provide a “long-term funding arrangement.”
But those investors informed OneWeb on March 12 that no such financing would be available, Whayne said. OneWeb quickly set its sights on a short-term loan, but by March 21 that, too, proved out of reach, he said.
“The anticipated funding opportunities OneWeb pursued were significantly and precipitously impacted by the COVID-19 pandemic and the resulting shuttering of the global economy,” Whayne said.
Analysts agree the coronavirus crisis roiling markets is making it difficult for companies to raise money, but OneWeb’s troubles began well before the outbreak became a global pandemic.
“We all had our doubts and have seen them struggling on the financial side for some time,” Janice Starzyk, vice president of commercial space at Bryce Space & Technology, said April 7 during a SpaceNews webinar. “Certainly, the immediate liquidity situation precipitated a more immediate action, but it was not likely to change the outcome either way.”
“The writing was on the wall,” added Claude Rousseau, research director at Northern Sky Research, citing pressure on SoftBank to divest from losing bets and reports that other OneWeb investors were writing down the value of their stakes.
OneWeb’s bankruptcy failed to surprise its former chief executive, either.
“Why did I think OneWeb was going to come into trouble? Primarily because SoftBank has had its own liquidity shrink,” said Matt O’Connell, one of OneWeb’s three former chief executives.
SoftBank troubles aside, OneWeb’s financial challenges were complicated by the fact that long-standing questions around its business plan remained unsolved.
OneWeb had long talked of bringing internet access to all of humanity, including the poorest, but doing so would require cheap user terminals sophisticated enough to track the company’s satellites across the sky. In the eight years since OneWeb was founded, the phased array antenna technology needed to make those user terminals remain prohibitively expensive for consumers.
“There is no path toward a $200 user terminal that anyone has,” said Samer Halawi, an Intelsat executive that worked as OneWeb’s chief commercial officer in 2017. “That’s a major limitation for constellations to be able to get a return on their investments.”
Halawi was tasked with finding customers and cementing a value proposition for OneWeb, a process he described as difficult. He described OneWeb’s strategy was one that started with its spectrum filings, then focused on satellite design before later addressing customer equipment and actual use cases.
“A lot of failures in this space have resulted from the fact that people did not start with the applications they are trying to serve, and then go from that to defining the technology and the system,” Halawi said.
OneWeb in late 2018 started emphasizing an initial focus on more lucrative markets like delivering broadband to airplanes, ships and governments, but a path to profitability still remained unclear.
“Lately I’ve had trouble figuring out what their business plan was,” said O’Connell, who left OneWeb in 2016 after nine months leading the company.
WHAT HAPPENS NEXT?
OneWeb has several spectrum filings, but its two most valuable cover a 720-satellite constellation with downlinks in Ku-band and uplinks in Ka-band frequencies. The company began using that spectrum after the launch of its first six satellites in 2019 and reached the International Telecommunication Union’s 10% milestone this March with 74 satellites.
OneWeb’s spectrum now has “priority status,” meaning other constellation hopefuls are obligated to design their satellites not to interfere with OneWeb. That priority status is ensured until 2026, at which point OneWeb will need 50% of its constellation in orbit to retain that status for a full 720 satellites. If OneWeb, or a future OneWeb owner, fails to launch at least 360 satellites by then, its spectrum rights will be reduced to the number in orbit.
If OneWeb, or a future owner of OneWeb’s assets, was to deorbit its satellites, it would have three years to field new spacecraft in the same spectrum before the license becomes invalidated, according to Alexandre Vallet, chief of the Space Services Department in the ITU’s Radiocommunication Bureau.
Analysts said it’s unclear who would want to buy those filings. Amazon and Telesat, both of which have plans for LEO constellations, have filings of their own for downlink in Ka-band, meaning use of OneWeb’s spectrum would require a redesign of their satellites. SpaceX’s Starlink constellation uses Ku-band downlinks, but is already designed and in the deployment phase.
One analyst speculated that a buyer could hold onto OneWeb’s spectrum licenses and satellites solely to prevent others from using them.
“If Amazon wants to do something defensive … this is it,” said NSR’s Rousseau.
Amazon filed with the ITU for a spectrum license in early 2019, years behind OneWeb, Telesat and SpaceX.
Charlie Ergen, the chairman of geostationary fleet operators EchoStar and Dish, is a fan of spectrum plays, O’Connell said.
“I’d be surprised if somebody in the Ergen empire didn’t at least look” at OneWeb’s spectrum, O’Connell said.
It was only weeks before OneWeb filed for bankruptcy that another LEO megaconstellation hopeful said his primary goal was to avoid that outcome.
“Guess how many LEO constellations didn’t go bankrupt? Zero” SpaceX CEO Elon Musk said at the Satellite 2020 conference in March. He listed Iridium, Globalstar, Orbcomm and Teledesic as companies that ran out of money while deploying, or attempting to deploy, low-flying constellations of communication satellites.
SpaceX, which has launched some 360 Starlink satellites in the past 11 months, intends to deploy 12,000 — and do so without declaring bankruptcy.
“That would be a big step — to have more than zero in the not bankrupt category,” Musk said.
Late last year another constellation hopeful, LeoSat, shut down after failing to raise the first $50 million toward a roughly $3 billion constellation of 78 to 108 satellites.
OneWeb, in contrast, raised $3.4 billion in equity and debt — enough to deploy the entire LeoSat constellation — before filing for Chapter 11 bankruptcy and pivoting to a spectrum sale.
OneWeb had an established network of suppliers, including Cobham, Sodern, Syrlinks, Hughes, Arianespace, SolAero Teledyne, and MDA, many of which expanded production capabilities to build at a scale previously unknown to the satellite industry. Many of those partners will now feel the impact of OneWeb’s bankruptcy.
Teledyne, which has a $95 million contract to provide signal converters and filter assemblies, said April 6 it is preparing to incur a $40 million pretax charge to its financial performance because of OneWeb’s bankruptcy.
OneWeb Satellites, the joint venture between OneWeb and Airbus, said March 30 it was reducing its workforce, citing the coronavirus even though the bankruptcy of its largest customer will likely have a bigger impact.
Arianespace, OneWeb’s single largest unsecured creditor, is owed $238 million. All three of OneWeb’s launches were arranged by Arianespace, which was under contract to provide 21 Soyuz launches in total and to carry a batch of 30 OneWeb satellites on the maiden launch of Ariane 6.
It remains to be seen how OneWeb’s bankruptcy will impact each of its suppliers, some of which were also investors. But in a market already spooked by the coronavirus pandemic, the ramifications will likely reach much further across the satellite industry.
“We will also see many flat panel antenna companies go out of business,” said Tom Choi, the former CEO of satellite operator ABS and a longtime critic of OneWeb. “How can they survive when their customers keep disappearing?”
This article originally appeared in the April 13, 2020 issue of SpaceNews magazine.