Following a week full of rumor, LEO broadband provider wannabe OneWeb filed for bankruptcy last Friday after a successful launch of 34 satellites the weekend prior.
Empty Space on the Tightrope
In “Pandemic-instigated Bankruptcies?” I wrote about OneWeb’s rumored plans for filing for bankruptcy, as well as what a filing might portend for its competitors. In that post, I noted that the most natural distinguishing characteristic of these low Earth orbit (LEO) broadband service competitors was funding. For OneWeb, I wrote:
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.
This balancing act is now in freefall. COVID-19 appears to be culling the weak and/or unhealthy companies in the space industry (there are a lot of them). From OneWeb's bankruptcy announcement:
While the Company was close to obtaining financing, the process did not progress because of the financial impact and market turbulence related to the spread of COVID-19.
Financially, OneWeb was never on solid ground. It has been on a constant prowl for funding since its founder, Greg Wyler, announced plans for the constellation (then WorldVu) in mid-2014. From a CNBC article:
“We’re constantly raising capital,” Steckel said, just after the company’s second launch. “We’re not being public about what we’re raising. When the time comes we’ll make an announcement.”
OneWeb’s one major investor, Softbank, is also not in a good, healthy financial space.
Back in 2014, people wondered why Wyler believed his constellation would meet a different end than Teledesic, Skybridge, or other LEO broadband contenders from the 1990s. I won’t discuss that history here, as I’ve already written about it, but the upshot for those earlier companies is they all failed. For a history of the rise and fall of earlier LEO broadband service contenders and a truly in-depth analysis of the current batch of contenders, go on over to the Quilty Analytics site and read the company’s LEO Broadband series (in which I authored some significant parts).
I would like to think that all the companies working with OneWeb were fully cognizant of the company’s shaky financials and understood the risks should OneWeb have gone under. I hope they did. But I also believe that if they were, it was through a risk model that didn’t include COVID-19. The companies below are just a sampling of the potential casualties of OneWeb’s filing. Since OneWeb is a European company, maybe it was natural for the company to primarily allot big contracts to other European companies, such as Airbus and Arianespace.
OneWeb’s satellite manufacturing partner is Airbus Defense and Space, a European company (also a backer). Together, they formed a joint venture--OneWeb Satellites--and constructed a satellite factory in the state of Florida. The intent of that factory was to build the initial 648 satellites OneWeb required for a basic operational broadband constellation. And then, if that went well, the factory would build over 1,300 more OneWeb satellites. The factory was supposed to produce as many as two satellites a day, an unheard-of manufacturing rate for any kind of satellite, much less sophisticated communications satellites.
It’s apparent that the factory, and its supply chain, will become dormant. OneWeb Satellites’ suppliers span four continents, indicating that while the factory’s closure impacts the local Florida economy, its shockwaves will have an international reach beyond Toulouse, France. How much of an impact depends on just how customized those supplies/parts were for OneWeb’s satellites (which may have contributed significantly to the company’s satellite costs).
As alluded to near the end of “Pandemic-instigated Bankruptcies?”, Arianespace and its Russian launch partner Starsem are going to be jolted when OneWeb files for bankruptcy. At the beginning of 2020, Arianespace was publicly stating it anticipated launching 22 missions for the year. This would have been record-setting as the typical annual launch cadence has been about 11-12 launches for the company, all out of its launch sites in Kourou, French Guiana. The additional missions were to be launched out of Baikonur in Kazakhstan or Vostochny in Russia (yes, this gets confusing--I believe it’s also unprecedented for Arianespace).
Arianespace also indicated half of those 22 missions would have been OneWeb-dedicated launches. Since Arianespace has already launched four missions (half of those conducted for OneWeb), it appears that fully half of the company’s scheduled launches in 2020 are no more (which means about 100% of Starsem’s share of Arianespace launches are gone). The company was already suspending launches in response to the COVID-19 pandemic before OneWeb’s announcement, ensuring that Arianespace won’t come close to its average annual launch cadence.
Between OneWeb’s announcement and the company’s own launch suspension, Arianespace’s bottom-line will be impacted negatively. It’s unclear how these events will impact the company’s Ariane 6 development. It may be that the new rocket will not launch this year.
OneWeb hired Echostar’s Hughes Network Systems to build out its ground infrastructure (a combination of contracts valued ~$300 million). Hughes was to get OneWeb's satellite gateway sites up and running and appears to have completed around 22 of them. Each site was to have “multiple tracking satellite access points” (antennas) to establish communications with OneWeb’s satellites and provide a network link between users on the ground and the satellite (before being relayed down to another site). Hughes was also working with OneWeb as a global distribution partner, using OneWeb’s connectivity with the company’s own service applications.
While Hughes likely has been or will be compensated for its infrastructure work, the distribution deal is probably on hold or gone. It didn’t seem as if Hughes considered any of the OneWeb deals critical. However, it did see them as useful, with the latest deal, announced in March 2020, potentially extending Hughes service applications. Hughes president, Pradman Kaul noted in that press release:
“OneWeb complements our service portfolio with a truly global coverage, low-latency option that will enable our customers to meet their end users’ needs for connectivity everywhere.”
Considering the timing of the bankruptcy versus Hughes’ press release, OneWeb may have surprised Hughes with its filing.
OneWeb has a constellation on orbit. It’s not fully functional and certainly not complete. According to reports, the company will lay off all but a small number of its 500 employees. Those remaining will staff the operations center to monitor the health of the 74 satellites currently on orbit. It’s not clear who will buy a constellation that is incomplete.
OneWeb’s factory may be more enticing. Barring SpaceX’s Starlink factory, it’s one of the fastest satellite manufacturing facilities in the world. If its manufacturing floor can be adapted to other types of satellites, it might represent an interesting asset to somebody. Since Airbus is an investor and a partner, the factory might be a way for the company to recoup its investment in OneWeb.
Probably the most valuable of OneWeb’s assets is the radio spectrum the company is sitting on. The company’s ku-band frequency (snagged from Skybridge) is also the band that SpaceX’s Starlink uses. Satellite telecommunications company SES has been vocal in the past about satellite companies requiring more ku-band spectrum. The spectrum also ties in, somewhat, with the incompleted OneWeb ground infrastructure.
OneWeb’s filing means there are now only three LEO broadband competitors left: Amazon, SpaceX, and Telesat. Of those three, SpaceX is the one to watch carefully as it also has to raise funds externally to keep building its Starlink constellation. There’s more information about the company’s financial situation in an earlier post, “Additional SpaceX Information and What is “Mission Essential,” Anyway?” SpaceX is the only one of those three companies with more than one satellite on orbit.