The planned merger between satellite companies OneWeb and Intelsat—a transaction orchestrated by Sprint parent SoftBank—has collapsed. Intelsat’s bondholders declined to back the transaction.
As noted by the Wall Street Journal (sub. req.), OneWeb in February announced it would purchase Intelsat to combine the companies’ satellite fleets to offer low-cost internet service across the world. As part of the deal, SoftBank agreed to invest $1.7 billion in the combined company for a 40% stake. SoftBank currently owns 20% of OneWeb.
News of the merger's failure could put a dampener on OneWeb’s plans to offer satellite-based wireless services to up to 1 billion subscribers worldwide. SoftBank’s Masayoshi Son has loudly touted OneWeb’s deployment plans, which involve deploying a range of satellites roughly 30 times closer to the Earth’s surface than existing communications satellites, resulting in internet download speeds of up to 200 Mbps, upload speeds of up to 50 Mbps and lower latency that existing services.
Indeed, OneWeb recently said that, in less than one year, it anticipates its first satellites will be in orbit and operational. And that, starting in 2019, it will enable high-speed access for all of Alaska where homes, tribal health centers and tens of thousands of residents are without adequate broadband access. Within its first two years of service, OneWeb plans to make significant progress toward closing the digital divide in the U.S.
Despite the collapse of OneWeb’s merger with rival satellite company Intelsat, Intelsat’s CEO Stephen Spengler said the “pre-existing commercial agreement among Intelsat, OneWeb and SoftBank will continue.”
“Under this agreement, we plan to jointly develop integrated solutions utilizing both of our fleets and to act as a sub-distributor to SoftBank for the attractive application segments of mobility, energy, government and connected car,” Spengler said in a release from the company.
Furthermore, according to Bloomberg, SoftBank is already seeking a transaction with other satellite firms. Citing an unnamed source, the publication reported that SoftBank has already begun talks with alternative satellite partners, including Inmarsat, and other potential partners could include Telesat or SES.
“While we are disappointed Intelsat was not able to achieve an acceptable agreement with its bondholders, we continue to be enthusiastic about OneWeb’s standalone prospects, and its potential to disrupt the satellite industry and communications business generally,” SoftBank’s CFO Alok Sama said in statement published by a number of media outlets. “SoftBank will continue to work with the OneWeb management team to seek alternative paths to accelerate its strategy.”
SoftBank owns roughly 80% of U.S. wireless carrier Sprint. However, SoftBank’s Son didn’t mention Sprint in his wide-ranging presentation at the recent Mobile World Congress trade show, instead discussing SoftBank’s investments in ARM and OneWeb and his interest in artificial intelligence.
SoftBank, OneWeb and Intelsat aren’t the only companies interested in the intersection of satellites and internet service. For example, billionaire and Microsoft co-founder Paul Allen recently unveiled an airplane—the world’s largest ever—that he built to cheaply deploy low-orbit satellites.