Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The French government will more than double its stake in debt-laden satellite operator Eutelsat, in a state-led €1.35bn capital raising that will see Paris strengthen its hold on OneWeb, Europe’s answer to Elon Musk’s Starlink.
The move comes the day after the French military agreed a 10-year deal to buy satellite communications services from OneWeb, which like Starlink delivers connectivity to business and government from the increasingly strategic region of low earth orbit. Although the value of the agreement was not disclosed, the news sent the company’s shares up more than 14 per cent on Thursday.
The capital raise, which will see the French state increase its stake from 13.6 per cent to almost 30 per cent in return for a total injection of about €717mn, risks leaving the UK little more than a bit-part player after it rescued OneWeb from bankruptcy as part of a $1bn buyout with India’s Bharti group in 2020. The UK’s 11 per cent stake in Eutelsat — the result of the decision to sell OneWeb to the French company in 2023 — will fall to 7.9 per cent.
Other core shareholders including Bharti will invest alongside the French government in a two-part €1.35bn fundraising before the end of the year.
The cash injection will help to close a €4bn gap in Eutelsat’s financing, stretched by the acquisition of OneWeb and a sharp decline in its traditional broadcast services delivered from satellites in higher geostationary orbit.
As a result of the capital raising, net debt is expected to fall to 2.5 times earnings before interest, taxation and amortisation by the end of the financial year, which will substantially reduce the company’s borrowing costs and enable further fundraising.
With net debt at close to four times ebitda the company would have struggled to meet the €2bn outlay required to maintain the ageing OneWeb constellation, which remains more expensive and less flexible than Musk’s Starlink. It is also facing a €2bn bill towards the end of the decade to develop a new generation of LEO satellites for Europe’s planned secure government constellation, Iris2.
Jean-François Fallacher, who took up the post of Eutelsat chief executive this month, said the capital raise agreed by key shareholders and the board on Thursday would enable the company to be “a central player in the development of the European sovereign space of tomorrow”.
France’s economy minister Eric Lombard said Eutelsat was at a “pivotal stage of its development . . . This transaction reflects our strong commitment towards a major player in satellite connectivity — a strategic sector at the heart of Europe’s digital sovereignty.”
The fundraising will be done over two stages. The first will be through a reserved capital raise of €716mn at a price of €4 a share, a 32 per cent premium to the average price over the past 30 days. The core shareholders have then agreed to subscribe to a subsequent rights issue to raise a further €634mn, which will be open to all investors.
The UK government has reserved the right to take part in the rights issue, a person close to Eutelsat said, although it has not confirmed it will do so.
The UK government declined to comment.
Meanwhile, the French government also intends to take a more active role in overseeing the company, and plans to move its stake from the state-linked investment bank Bpifrance to the APE, an agency that directly manages France’s stakes in companies.
Eutelsat forecast revenue of between €1.5bn and €1.7bn by the end of the 2028/29 financial year.
Read the full article here