Pandemic-instigated Bankruptcies?

OneWeb, one of the four remaining serious contenders in the race to deploy broadband satellite service from satellites in low Earth orbit (LEO), managed to deploy another 34 satellites this last Saturday. This addition means the company has deployed ~11% (74) of 648 initial OneWeb satellites, about an 8% lead on SpaceX, one of OneWeb’s LEO broadband rivals. While SpaceX has deployed over 360 Starlink satellites, it’s goal is to deploy nearly 12,000, meaning only 3% have been deployed so far.

OneWeb predicted it would reach operational capability and profitability sometime in 2021, but another OneWeb tidbit hit the news right before the weekend--it’s considering bankruptcy. If it does this, then OneWeb will be following a path established by LEO contenders decades ago. Considering everything OneWeb has managed to do, including getting satellites launched, it’s a little surprising to hear the company is considering bankruptcy.

Pandemic Realities

Based on a OneWeb quote from a TechCrunch story, it appears OneWeb will still launch more satellites:

“The OneWeb launch is going ahead on Saturday with more launches planned later in the year; however, like others, we are impacted by the global health and economic crisis and we need to dynamically adjust our workforce. Unfortunately, we think it is inevitable that there will be delays to our launch schedule and satellite manufacturing due to increasing travel restrictions and the disruption of supply chains globally. Therefore, we made the difficult decision to eliminate some roles and responsibilities as we work to focus on core operations. We are sorry to have had to take this step and we’re doing everything we can to support those affected.”

This quote makes it sound like OneWeb’s satellite manufacturing and its chosen launch service provider, Arianespace, are causing delays. The company has contracted to use the Russian Soyuz launch vehicle for the majority of its satellite deployments. The Soyuz is one of the more reliable launch vehicles the Russians have with slightly over 1900 launches under its belt since it was first launched. It’s typically the rocket with the most share of Russian launches annually (almost always above ten launches). Meaning the Russians have a handle on how to manufacture this rocket and know just how often they can launch it.

OneWeb’s satellite manufacturing, on the other hand, is new. The company’s Florida factory, where the majority of OneWeb satellites are manufactured, was opened in the summer of 2019. The factory churns out about 1.5 satellites every day, meaning it takes OneWeb a little over three weeks to get the desired number of satellites (34) for a single Soyuz launch. Any delay in manufacturing, such as shutting/slowing down for COVID-19 reasons, obviously impacts the launch campaign--if it were running as initially planned. But it isn’t thanks to the pandemic and industry reactions to it.

According to Arianespace, there were to be 11 OneWeb launches in 2020. This launch rate means OneWeb would have required to have 374 satellites ready for launch (which it could theoretically do in about 250 days). Except that Arianespace has suspended launch operations because of COVID-19, at least from its French Guiana facilities. Saturday’s OneWeb launch from Kazakhstan through Arianespace’s Russian affiliate, Starsem, shows that the Russians have not suspended launch operations. Arianespace was planning with Starsem to launch eight launches from Kazakhstan and Russia in 2020. I am assuming all eight of those launches are for OneWeb satellites.

But, if OneWeb is considering bankruptcy, then maybe that’s a sign it believes its satellites will not be ready for the remaining six launches (two of the eight were launched already).

A Choking Canary?

A different question can also result from this story: what does OneWeb’s bankruptcy, if that path is chosen, imply for the other LEO broadband companies? Is OneWeb, in other words, a canary in the coal mine?

The answer to that question depends on the company.

Three remaining companies have thrown their hats in the LEO broadband ring. Going alphabetically:

• Amazon’s Project Kuiper
• SpaceX’s Starlink
• Telesat’s Telesat LEO

Of those three, only SpaceX and Telesat have fielded satellites for their LEO broadband constellations. Telesat deployed a single demonstration satellite, and SpaceX has deployed 362 satellites (two of those were demonstrators). SpaceX is building Starlink satellites--7 per day--in Redmond, Washington. Telesat has yet to choose a satellite manufacturer. Because of this, I will focus only on OneWeb, SpaceX, and Amazon.

The unknown is Amazon, with its Project Kuiper constellation. While the company released some details about its constellation plans in its FCC application, it hasn’t launched a single satellite. The U.S. Federal Communications Commission (FCC) hasn’t approved Amazon’s application, either, but there’s no reason to think it will not do so.

Greg Wyler, OneWeb’s founder, was the first to throw his hat into the ring nearly six years ago, starting a race among new LEO broadband contenders. Based on last week’s reports, while OneWeb isn’t the first of the new group of LEO broadband companies to throw in the towel, it is one of the first leaning that way of the group that is deploying satellites. Will the others, Amazon and SpaceX, follow OneWeb’s lead?

The most natural distinguishing characteristic of these companies is funding.

OneWeb raised $3.4 billion by early 2019. Of that, the company spent a lot of money, over $2 billion, just to build the infrastructure and supply chain to manufacture satellites daily, as well as the launch contract, which Arianespace gave a value range of $1-2 billion. These numbers make it appear as if OneWeb has constantly been balancing between operations and bankruptcy.

SpaceX, in the meanwhile, has Elon Musk. Musk consistently can raise money with his latest SpaceX funding round seeking to sell $250 million in shares. At the end of the round, the company found itself selling $500 million in shares, at $220 per share, and the company valuation increased to $36 billion from around $33 billion in 2019. SpaceX’s launch service alone is estimated at providing around $2-3 billion in revenues.

With Amazon, it’s all conjecture, but it seems reasonable to believe the company will easily fund its constellation, with little need for outside help. It’s probably also fair to think that if Project Kuiper is ever to consider bankruptcy, then Amazon is in a very dire financial situation. Especially today, considering the reliance some customers have on the online giant to deliver goods while remaining isolated.

SpaceX’s and Amazon’s funding seems to be in a much different place with different sources from OneWeb. This indicates that the funding challenges OneWeb is dealing with and exacerbated enough by COVID-19 to consider bankruptcy, are not the challenges that will cause SpaceX or Amazon to consider similar actions.

One more thing to consider. If OneWeb does go the bankruptcy route, how will that process impact Arianespace? It seems as if Arianespace is very, very reliant on OneWeb's series of launches and it may be a reason OneWeb called out its intent to go ahead with launches later in the year. I am not sure how that works. A OneWeb bankruptcy seems very unlikely to put Arianespace in a strong position in the launch industry, which should be a troubling development for Europeans.