OneWeb and Eutelsat Combine to Take on Starlink and Satellite Sector
Key Takeaways
- The British and the French are joining forces in a merger that will see OneWeb and EutelSat combine
- They’ll create a major player in the private space sector, and will introduce more competition for Elon Musk’s Starlink
- The space sector is expected to grow from around $550 billion now to $1 trillion by 2040, meaning investors should pay attention
The private space sector is heating up all the time, and one particular area of growth is the rise of private satellites. Right now Elon Musk’s Starlink is one of the biggest names in the space (yep), but there are plenty of other satellite companies fighting for market share while flying under the radar (there’s another one).
And now we’re seeing the creation of what could be the biggest competitor to Starlink yet, with the merger of British giant OneWeb and French counterpart Eutelsat.
The new company will prove to be a force to be reckoned with in the European market and they already count a number of the continent’s largest telecom providers as clients.
The deal was received well by the market, with Eutelsat stock jumping 3.5% on the Euronext stock exchange.
OneWeb and Eutelsat complete merger
The all stock merger was completed on Thursday, and will allow each company to combine their specialty satellites and broaden their overall customer base. OneWeb specializes in low orbit (LEO) satellites like Starlink, while Eutelsat’s main focus is on GEO satellites which travel much farther from earth, but only on a fixed axis around the equator.
A key difference between these two satellite companies and Starlink, is that Elon Musk has chosen to target consumers in greater numbers, while OneWeb and Eutelsat have both placed more emphasis on the corporate market. Lately, Starlink has started to make moves toward that market in a bid to improve margins.
Big opportunities, but big challenges
The space industry continues to grow and it’s likely to have a long way to go yet. Analysts at Morgan Stanley believe that the global space sector could be valued at up to $1trillion by the time 2040 rolls around, up from a current valuation of around $550 billion.
Even so, it remains a space with incredible technical and business challenges. Even OneWeb themselves have come back from bankruptcy in 2020, which included a $500 million bailout from the UK government.
The bottom line
Space is definitely a sector for investors to watch. There continues to be a massive amount of investment into the sector, and the potential for future revenue is huge, as the projections from firms such as Morgan Stanley show.
The challenge will be to understand which companies are positioned to stand the test of time, and which are likely to flame out before they can turn hype into profits. It’s a similar challenge that faces the tech sector, especially in pre dotcom bubble times.
As always, the safest approach is to take a diversified stance, to ensure you’ve got some exposure to all the potential winners in the sector.
