OneWeb Tangled Web

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The OneWeb Intelsat merger corpse is getting colder and colder by the day and several observers close to the action have said that the advisers have failed to resurrect the deal, and are being blamed for setting expectations badly.

OneWeb threatened that it was dancing with other operators.  The latest rumour doing the rounds this morning concerns Inmarsat, the English listed MSS operator.  Softbank, which controls OneWeb,  owns Fortress, the hedge fund with a controlling stake in Ligado, the company trying to monetise L-band satellite spectrum by turning it into 5G spectrum for mobile phone networks.  Ligado pays Inmarsat some $150m every year in return for spectrum co-ordination agreements that facilitate that spectrum flip trade.   If Softbank were to buy Inmarsat, it would have far greater control over that US spectrum, which it would plan to use in the Sprint business that it controls, and which it wants to merge with T-Mobile.  So, it all comes back to spectrum.  For OneWeb to make any sense, Softbank also needs to have the satellite spectrum, ground systems and management resources to build out the system.  So Inmarsat could be useful.  However OneWeb has already signed a contract to outsource these kinds of functions to Intelsat, which is an investor in OneWeb.  Expect a law suit from Intelsat if OneWeb tried to do something different.  However, OneWeb has run into some weeds, namely :

a) recent high profile criticism about the yarn that OneWeb spins about meta material phased array antennae for consumers at sub $200 (most industry experts regard this as impossibly silly).

b) the dawning realisation that the Kessler effect means that no sensible government will give OneWeb an unlimited liability space license to blow up space.

c) growing anger from other operators like ABS over the likelihood of spectrum interference.

d) the likelihood that the satellite costs will have to escalate to include a heavy collision avoidance system, incurring also much higher launch costs as a result.

It would therefore be unsurprising if Softbank has gone sour on its investment.  Intelsat was a smart way out, Inmarsat would be an expensive way out because it’s a super premium asset that shareholders won’t let go cheaply, and governments like the UK would be keen to retain some sovereign oversight.

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