Joint Adventure

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What's going on?

French satellite operator Eutelsat confirmed on Monday that its in talks to combine with smaller UK-based rival OneWeb.

What does this mean?

Eutelsat already bought 23% of OneWeb back in 2021, but looks like that wasnt enough: the two are now discussing a so-called merger of equals deal, which would see each set of shareholders end up with a 50% stake in the combined company. If it goes ahead, the deal would help boost Eutelsats growth and offset its slumping satellite video business, while giving OneWeb the nearly $3 billion investment it needs to complete its network and update its technology.

The industry is big business: satellites are used for everything from internet communications to weather forecasting these days, and the satellite connectivity market is estimated to be worth around $16 billion by 2030 (tweet this). These talks could be a sign that the two companies backed by the French and UK governments who see space communications as a strategic industry are battling to keep their seat at the table of an increasingly competitive sector. After all, the likes of Elon Musks SpaceX and Amazons Project Kuiper are launching new technology that can deliver connections faster since theyre closer to the ground.

Why should I care?

For markets: Back down to Earth
Peeved investors sent Eutelsats stock down nearly 20% after the news: they likely think Eutelsat should have a higher ownership stake in the combined company, and theyll know that the massive investment OneWeb needs will eat into shareholder returns. They might have a point: Eutelsat already boasts significant cash flows while OneWeb currently makes little to no revenue

The bigger picture: We have eyes in space.
Space is about to get even busier: UAEs government announced plans last week to set up a near $1 billion fund for satellites and its ambitious space program. The initiative aims to launch its first satellites in three years, designed to help detect things like oil spills, monitor ships, and aid search and rescue missions.

Originally posted as part of the Finimize daily email.

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