A bit of noodling around the corridors of power puts an interesting spin on the Airbus OneWeb story. Two theories have been proposed to explain why Airbus would agree to invest its money in a project that Facebook, Google, and every satellite operator in the world rejected as being unworkable.
Obviously, the LEOs of the nineties (Iridium, Globalstar, Skybridge, Teledesci, ICO) were initiated by manufacturers and had varying degrees of success in persuading Wall Street to pony up. Airbus may be hoping the the generation of bankers and investors who got burnt when they all went bust has gone and some new greater fools can be found to pay Airbus the $2.7 billion needed to build the fleet. Rational enough hope, although fanciful, given that the Five Impossible Things* such a LEO has to overcome to be successful are now widely understood amongst investors.
However, the two other potential rationale’s for this deal are intriguing.
1. Another Sleight of Hand
Maybe Airbus realised how powerful the announcement of such a big bang can be in diverting attention away from more tedious issues. Airbus is widely regarded to have massively overpaid at $900m for Vizada in its desperation to get into the maritime services market. Vizada has gone very badly wrong and is now being sold off, some bankers think for as little as $200m. One banker suggested that since Vizada’s business was 75% resale of Inmarsat Mini-M services, Inmarsat had the ability to kill the business if it felt that Airbus was the wrong partner. Given Airbus’ ownership of the Skynet satellites and general desire to increase service business, it does seem that Airbus is trying to compete with all its customers, so Inmarsat may well have pulled the plug on Vizada. Blowing over half a billion dollars in a few years is not a great investment. But trying to divert attention by making an even flakier investment might seem counter-intuitive to rational observers. (As an aside we wonder how Airbus Satellite’s biggest customers like Eutelsat, SES and Arabsat feel about Airbus telling them it is going to own competing satellites in the data market that represent the “New Space” alternative to their “Old Space” methods – (bet they loved hearing that and will be rushing back to Airbus to buy more satellites soon).
2. The jewel in Airbus’ satellite empire is Arianespace, which faces an existential threat from SpaceX. SpaceX has announced that it will put an experimental satellite or two up to try to test its ability to make micro-sats, and more likely, to get the spectrum filing clock underway – one Deep Throat regulatory manager told us that its remarkable how people who do not HAVE ITU filings think that the barriers can be overcome just by shouting loudly. So Airbus sees SpaceX potentially opening up a new market for its launches (albeit funded by unwisely invested Wall Street money which will get burnt), and may well want to chill SpaceX’s ability to access the capital it would need to create such a constellation by presenting a well funded European competitor, thereby shutting it all down. We are of the view that SpaceX is not serious about a LEO internet fleet, its main business with Google is launching the SkyBox Imaging spysat fleet, so Airbus may be chasing shadows here – but it certainly does have motive to cause SpaceX harm.
Apparently the whole deal was pressed home at the insistence of Tom Enders personally, and other satellite manufactures were not entertained because they were not prepared to invest any money on OneWeb. This suggests that Enders does have as Corporate Strategic reason in mind. Eric Beranger who now holds the baby will be hoping that this is not a repeat of the Vizada investment.
*The Five Impossible Things OneWeb must do
1. Persuade all the world’s Ku band operators to accept the risk of harmful interference to their services when they have the right through the ITU to say “no”.
2. Invent antennae which can follow dozens of satellites across the sky simultaneously and switch between them every 45 seconds and make them for $250 per unit.
3. Build and Launch 900 satellites quickly enough to get a return before the end of their five year life (100% of Arianespace’s launch capacity for two years solidly).
4. Devise a methodology to stop the LEOs from crashing into each other and bringing the Space Industry to its knees
5. Persuade China, Russia and India to license the system and find a way to make money over the two thirds of the world that is water.