Before entering bankruptcy OneWeb had been funded to the tune of $3.3bn with no revenues generated yet
A government minister has claimed that the UK is “likely” to make a return on its £400m investment on bankrupt satellite firm OneWeb.
The government, in partnership with Indidan telecoms outfit Bharti, beat other bids to seal the acquisition of OneWeb for $1bn earlier this month. The company, which is based in both the UK and US, filed for bankruptcy in March, and the buyout deal is now subject to approval from US regulators, bankruptcy courts, and creditors.
Having been founded in 2012, the satellite company has attracted funding of $3.3bn during its lifespan, with backers reportedly including Virgin, Airbus and Japanese conglomerate SoftBank, which is understood to have invested as much as $2bn.
According to OneWeb’s most recently published accounts, its latest cash injection was $1.25bn raised in March 2019 via a “debt and warrants financing round”.
When it announced, on 27 March, the commencement of bankruptcy proceedings and a sale process, the satellite company said it had been “close to obtaining” further financing, but that “the process did not progress because of the financial impact and market turbulence related to the spread of Covid-19”.
Building satellites is an expensive business and the government will no doubt need to provide further funding beyond the initial £400m spent on the acquisition.
OneWeb’s accounts for the 2017 and 2018 calendar years show operating costs of £81.3m and £216.5m, respectively. This level of costs will continue, if not significantly increase, as the company builds and launches more satellites; it currently has a constellation of 74 in orbit, and has filed a request with US authorities to ultimately increase this to 48,000.
The company is yet to generate any revenue, let alone profit.
Nevertheless, when asked in a written parliamentary question from Labour MP Chi Onwurah whether the government will see a financial return on its investment, science, research and innovation minister Amanda Solloway said that she believes it will.
“This investment is likely to make an economic return, with due diligence showing a strong commercial basis for investment,” she said. “The deal contributes to the government’s plan to join the first rank of space nations, and signals the government’s ambition for the UK to be a pioneer in the research, development, manufacturing, and exploitation of novel satellite technologies enabling enhanced broadband through the ownership of a fleet of low-Earth orbit satellites.”
Onwurah also asked the extent to which the UK Space Agency was consulted about the acquisition.
“The government collectively reviewed and agreed to lead a successful bid to acquire OneWeb, who develop cutting-edge satellite technology in the UK and in the United States,” Solloway said.
The government has been looking for a way to ensure the UK has access to a satellite navigation and positioning network since 2018, when it became clear that, following Brexit, the country would be shut out of the secure parts of the EU Galileo satnav network that are designed for use by the emergency services and the military. The UK had already spent about £1.2bn on supporting the development of the Galileo at the time it was effectively booted out of the programme.
OneWeb’s stated mission is to use satellite technology to provide universal access to high-quality broadband across the world.
When the acquisition was announced, the firm said it “remains ready to continue building its communications system to deliver transformative connectivity available everywhere, including to businesses and people in remote and rural parts of the world – starting with the Arctic”.