July 6, 2020 / 7:07 AM / a month ago

Breakingviews - OneWeb’s relaunch shortens distance to profit

FILE PHOTO: A scale model of an Airbus OneWeb satellite and its solar panel are pictured as Airbus announces annual results in Blagnac, near Toulouse, France February 14, 2019. REUTERS/Regis Duvignau/File Photo

MUMBAI (Reuters Breakingviews) - OneWeb’s relaunch will better position it to go head-to-head with Jeff Bezos and Elon Musk in orbit. The collapsed SoftBank-backed satellite startup is set to exit bankruptcy and get back into the internet space race with a $1 billion injection from the owner of India’s Bharti Airtel, the world’s third-largest telecom operator, and the UK government. The deal, if approved, will shore up future revenue and reduce sizeable risks.

The London-based company’s mission is to provide fast, affordable internet everywhere. OneWeb already has about 74 satellites circling the planet and is aiming build a network of about 650. Future customers will be able to surf the web from the mountains, deserts and oceans using a lightweight mobile antenna. The numerous profitable applications for the technology are underscored by OneWeb’s earlier backers, which include Airbus Group, Coca-Cola and Qualcomm. So are the risks: the company has already burned through more than $3 billion, most of the money it raised.

The new investors will put the cash-guzzling company back on course toward profitability. Chief Executive Adrian Steckel told Reuters Breakingviews in October that the company planned to be operational within two years – which now sounds ambitious. The UK government and Bharti will each invest $500 million for a 45% each, with the balance of the company held by creditors.

It’s notable that Bharti, which bought a small stake in 2015, hasn’t been put off by the bankruptcy. Its presence guarantees OneWeb will have at least one big future customer. The company has access to over 425 million telecom customers across India and Africa, and sees potential to bridge the urban-rural digital divide and hedge the existing business. In India, for example, there are less than 50 million fixed-line broadband users, mobile network coverage is patchy, and spectrum costs are unpredictable. The UK government, for its part, is betting the untested OneWeb will compensate for losing some access to Europe’s satellite-navigation programme post-Brexit.

However, neither of these buyers are known for the same risk appetite as SoftBank or deeper-pocketed rivals at Blue Origin and SpaceX. In addition to ordinary competitive challenges, risks range from space debris to increasingly prickly international relations in orbit. OneWeb’s new owners had better strap in tight.  

Breakingviews

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