Britain and France can’t compete with Musk in space
Rescue of Oneweb was flawed from the start and now the merger with Eutelsat could heap more embarrassment on ministers
Surely nothing encapsulates Britain’s muddled industrial strategy more than the ham-fisted, Government-led attempt to turn failed satellite operator Oneweb into a serious player in the private sector-led space race.
The takeover, at the height of the pandemic, was derided by experts at the time as “nonsensical”, but it at least made Global Britain look as though it had global ambition.
That illusion has lasted all of two years, as the company prepares to slump into the hands of French-backed rival Eutelsat.
The reaction of the stock market says it all. Confirmation of talks between the two sides sent Eutelsat’s shares crashing nearly 20pc in early trading, crushing any suggestions that the tie-up will create a new satellite operator capable of competing with the billionaire space entrepreneurs Elon Musk and Jeff Bezos.
Investors had heard it all before, anyway, when Boris Johnson stepped in to save Oneweb in July, 2020. The strategic investment would “put the UK at the forefront of space tech”, he said.
The reality has turned out very differently. Eutelsat is scrambling for growth to offset its declining satellite video operations, while Oneweb requires an estimated $2bn (£1.7bn) to $3bn of new funding to complete its network and update its technology. That’s why the pair want to come together. In dealmaking parlance, it is the equivalent of two drunks propping each other up at the bar.
Indeed, it looks suspiciously like the British Government is distancing itself from Oneweb at the first opportunity despite the many downsides of Eutelsat’s proposal.
As if it wasn’t bad enough that UK taxpayers became shareholders in a failed home-grown satellite operator largely at the behest of the Prime Minister’s deluded special adviser Dominic Cummings, the state will now end up with a stake in a company that broadcasts Russian television channels accused of facilitating Kremlin disinformation.
Eutelsat provides television broadcasting to 15m Russian households, including channels that Reporters Without Borders alleges are “spearheads of the Russian war propaganda machine”. Watching ministers try to navigate that public relations dilemma will be fascinating.
Meanwhile, a deal billed as the ultimate display of British sovereignty in the new space race has ended just two years later in a “merger” that has been dismissed as a French coup by stealth. Based in Paris and listed on the Euronext stock exchange, Eutelsat’s largest shareholder is the French state, raising fears that manufacturing will inevitably shift to France, eroding British influence further.
The tie-up comes with genuine security concerns too. On the day that prime ministerial hopeful Rishi Sunak was warning that “the largest threat to Britain and the world’s security and prosperity this century” is China, it turns out that a takeover of Oneweb risks handing Beijing backdoor access to the spying technology used by the “Five Eyes” intelligence sharing alliance involving Britain and America. With the sovereign wealth fund China Investment Corp in possession of a 5pc stake in Eutelsat, there will surely be intense scrutiny on the security contracts that Oneweb runs on behalf of the alliance, a partnership that France isn’t a part of.
Even the so-called “paper profit” the deal’s proponents were quick to point to as evidence of the Government’s commercial prowess has been obliterated by the market’s reaction to talks with Eutelsat.
The Oneweb takeover was utterly confused from the start. It never made much sense that the Government was willing to prop up a small bankrupt satellite operator at the same time as British corporate titans like Rolls-royce and British Airways were being ordered to fend for themselves during the pandemic.
Nor does it square with the willingness of ministers to stand meekly to one side while great swathes of British manufacturing and technology, including chip-making champion Arm, have fallen into the hands of overseas buyers.
Oneweb simply became a special case because of Cummings’s obsession with Britain competing in space. But it was totally unrealistic to think that the UK could compete with the commercial nous and financial firepower of Musk and Bezos.
Before Oneweb, Avanti, Lightsquared and Intelsat had all tried but failed to upend the world of wireless communications, and though its model relied on smaller, cheaper satellites it was still attempting to compete with the might of Silicon Valley’s biggest names.
Oneweb’s greatest weakness was that its satellites relied upon Russian rockets to get into space, a vulnerability that was exposed when the Kremlin refused to facilitate any more after the invasion of Ukraine. Musk meanwhile has quickly achieved hero-status among Ukrainians. Blessed with its own successful rocket-launching expertise, the Tesla tycoon’s Starlink system has enabled both the military and civilians to maintain contact with the outside world after Russia severed the local cell phone network.
Having already spent billions of pounds building a constellation of more than 400 satellites, it seems that Whitehall isn’t prepared to pour any more taxpayer money into the Oneweb project. That is wise. Sovereign capability is important, but commercial nous will be the decisive factor. The winner of the new space race will be far more nimble than this uncomfortable coalition of governments and shareholders.
‘The tie-up with Eutelsat comes with genuine security concerns’