Macron’s Moonshot looks like a distant plan

The last decade for satellite startup OneWeb has felt like a space opera. Founded by an American entrepreneur and based in London, it partnered with Google and Elon Musk, supplied Arianespace, attracted investment from Hughes Network Systems and SoftBank Group and went bankrupt. It was later rescued by the British government and the Indian company Bharti Global.

The next act has all the hallmarks of a post-Brexit boost to the European war economy. Its announced 50-50 merger with French company Eutelsat Communications SA would create a European champion capable of competing with Musk’s SpaceX and Amazon’s Kuiper project.

This development is both imperfect and yet, in a way, inevitable.

Shareholders of Eutelsat, 20 percent owned by a French state investment company, have good reason to feel bruised by the conditions and schedule. The company’s shares fell 17.8% on Monday, a sign that OneWeb’s lack of sales and future spending needs will weigh on earnings. As John Davies, an analyst at Bloomberg Intelligence, put it, a “merger of equals” would benefit OneWeb more than cash-generating Eutelsat.

But given that Eutelsat risks being left on the launch pad by its competitors, it also makes strategic sense.

Eutelsat has depended for too long on reliable cash flow but declining revenue growth from traditional satellite TV. The group’s sales fell from around 1.5 billion euros (around Rs 12,150 crore) in 2016 to 1.2 billion euros (around Rs 9,700 crore) last year, data shows from Bloomberg. Musk, meanwhile, projects annual revenue of $50 billion (roughly Rs. 3,99,530 crore) from his lower-orbit Starlink project, sparking angst in Europe as its rollout accelerates . Investments in European space startups reached €610 million (around Rs 4,940 crore) in 2021, a fraction of the $5 billion (around Rs 40,510 crore) invested in US companies in 2020, according to a report from the Ifri think tank.

Diversifying into lower-orbit satellites means more risk and more capital expenditure for Eutelsat – a series of such projects have gone bankrupt in the past (including OneWeb). But it also offers the opportunity to tap into increased demand for faster speeds and higher power in sectors like telecommunications. And in a wartime economy, it promises to bring more data and cybersecurity expertise, as well as a bigger role for Europe in space – something close to Macron’s heart.

It would no doubt have been simpler and simpler for shareholders to imagine a buyout by Altice billionaire Patrick Drahi, whose €2.8 billion (roughly Rs. 22,690 crore) approach was rejected , or a merger with its rival SES which would have made it possible to save money. Yet Drahi’s offer seemed opportunistic, not fitting for his telecommunications empire, while SES would have triggered its share of antitrust and national security concerns.

Many details still seem unclear. Governance of the merged entity will require political cooperation between governments who cannot even agree on fishing rights in the wake of Brexit. Financially, it’s unclear how much spending will be necessary to compete with Big Tech billionaires; When Eutelsat first invested in OneWeb last year, management called it an “ideal” entry point, as $5 billion (around Rs. 39,950 crore) had already been invested.

But overall, this plan feels like a microcosm of the current geopolitical environment — and the kind of corporate strategies that get a cold reception in the stock market. A once reliable, cash-generating defensive play, now transformed into a cash-hungry competitor in a strategic area dominated by big U.S. spenders, is not the kind of story many shareholders want to hear.

Yet reaching for the stars is exactly what it will take for Europe to avoid ending up on the launch pad.

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