SoftBank enters agreement over OneWeb, Intelsat merger
28 February 2017 | Jason McGee-Abe
SoftBank-owned OneWeb has entered into a multi-billion dollar definitive combination agreement with Intelsat to merge and create a new global satellite force.
“OneWeb has made incredible technical progress over the past year, and has itself attracted significant investment from SoftBank,” said Greg Wyler, founder and executive chairman of OneWeb.
OneWeb is valued at $2.5 billion, while Intelsat has shares with a market value of around $500 million and carries about £15 billion of debt. In total, the new business would have an enterprise value of about $18 billion if Intelsat's bonds were acquired at 100 cents on the dollar. However, SoftBank aims to pay just over half the debt's face value, which would mean the valuation would likely drop to $10 billion to $14 billion.
“With SoftBank’s support we will build the world’s first truly global broadband company, accelerating our mission of bridging the digital divide by connecting the four billion people without access today. While there are numerous growth paths available to OneWeb, we are very excited at the prospect of working with Intelsat on this shared objective,” added Wyler.
OneWeb, whose other backers include Qualcomm, Airbus, Bharti Enterprises, Hughes Network Systems, Intelsat and Virgin, will be a low-earth orbit network of 720 tiny satellites that will connect new base stations in remote areas with very low latency.
Masayoshi Son, chairman and CEO of SoftBank, said: “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.”
The deal, which is expected to close late in the third quarter of 2017, is set to see the companies merge in a share-for-share transaction and see the Japanese group make a capital injection of $1.7 billion in cash into Intelsat. SoftBank invested $1 billion in the OneWeb satellite project in December, said today that it expects to acquire a voting stake no greater than 39.9% in the combined entity.
"The entry of SoftBank was a very important step for us," OneWeb CEO Eric Béranger recently told Capacity in an interview. "SoftBank will want to market our services to every part of the world."
OneWeb will supply terminals that will deliver mobile and Wifi signals in the immediate area and connect with the company’s satellites 1200km above the earth – a distance that means round-trip latency of only 8ms.
The focus will be on remote and unconnected areas, said Béranger. "There are 55 million US citizens who are unconnected, and 61% of Asia and the Pacific are unconnected or badly connected." But OneWeb will also be able to provide connections to ships and aircraft. The first 10 OneWeb satellites are due for launch in early 2018, with the whole fleet of 720 due to be in service by the end of 2019.
Stephen Spengler, CEO of Intelsat, said: “We believe that combining Intelsat with OneWeb will create an industry leader unique in its ability to provide affordable broadband anywhere in the world. As an early equity investor in OneWeb, we recognised a network that was a complement to our next-generation Intelsat EpicNG fleet and a fit with our long-term strategy. By merging OneWeb’s LEO satellite constellation and innovative technology with our global scale, terrestrial infrastructure and GEO satellite network, we will create advanced solutions that address the need for ubiquitous broadband."
Last month, Intelsat's new Epic satellite, the Intelsat 33e, completed in-orbit testing and went live. In the investor call today, Spengler said that after its first engagement with OneWeb in 2015, "we straight away saw the complementary nature of both fleets being completely interoperable". "We’ve always had a mission to improve connectivity around the world and we’re doing that today working with many operators. [This deal] gives us additional ways to serve end-user consumers."
Spengler added: "The transaction, including SoftBank’s investment, will significantly strengthen Intelsat’s capital structure and accelerate our ability to unlock new applications, such as connected vehicles, as well as advanced services for our existing customers in the enterprise, wireless infrastructure, mobility, media and government sectors, while also reducing execution and other risks.”
The Board of Directors of the combined company will be made up of seven directors, including three independent directors, three members selected by SoftBank and one director selected by a current Intelsat shareholder. Intelsat’s Spengler will be the CEO of the combined company and OneWeb’s Wyler will be the executive chairman of the combined company’s Board of Directors.
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