OneWeb Chapter 11 Stirs Mega-Constellation Doubts
OneWeb's Chapter 11 filing could result in fundraising challenges for other broadband non-geostationary orbit constellation plans, NGSO experts told us. Some said it could stoke doubts about the mega-constellation-delivered broadband business model. The company said it's using bankruptcy as a way to buy time until global markets rebound from the COVID-19 slowdown so it can then sell itself.
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The bankruptcy is no surprise since from the beginning, the company "was like a big science project" lacking an established business case about how to make money bringing satellite-delivered connectivity to populations that are typically poor, said satellite consultant Hany Eldeib. As long as OneWeb founder Greg Wyler was able to sell investors like SoftBank on the idea, "everybody was kind of, 'OK, we'll go along,'" Eldeib said.
Eldeib said mega constellations like SpaceX and Amazon's Kuiper could be more insulated because they have the backing of billionaires, though the bankruptcy could make it harder to attract outside investment. He said more-limited low earth orbit connectivity constellations like Telesat serving a niche could have a better chance, he said.
OneWeb was rumored to have financing problems before COVID-19, and the pandemic "is a massive issue for the space startup community [as] venture capital has run for the hills," said Greg Autry, University of Southern California business professor. For NGSO broadband constellation business plans, the pandemic "is like a perfect storm" because it's also hammering other industries that were considered likely customers of that connectivity, such as airlines, he said.
Kuiper and SpaceX are still likely to come to fruition given Jeff Bezos' and Elon Musk's financial wherewithal, Autry said. It's less clear whether SpaceX ends up as big a constellation as proposed.
Autry said the U.S. government might want to consider becoming an anchor tenant on such constellations since it's in the national interest for U.S. players to dominate the market and establish the communications standards. He said otherwise, Chinese companies offering a Chinese version of internet access could become the norm for developing nations. The U.S. offering unrestricted and uncensored internet connectivity globally to those markets might make "a great U.S. soft power play," he said.
Satellite consultant Tim Farrar said OneWeb's bankruptcy is going to mean renewed questions about the size of the satellite broadband market. He said SpaceX could face big questions about financing since it fell short earlier this month in fundraising efforts. SpaceX didn't comment.
In its petition Friday with U.S. Bankruptcy Court in Manhattan (see here, in Pacer, docket 20-22437), OneWeb said its single largest creditor is Arianespace, with a claim of $238.1 million, plus $8 million owed Qualcomm and $6.8 million to Deloitte Touche. In an accompanying declaration, Chief Financial Officer Thomas Whayne said the company's most-important assets are its spectrum licenses issued by the U.K.'s Ofcom and France's Agence Nationale des Frequences. He said it has landing rights or market access licenses in Argentina, Australia, the Bahamas, Canada, Colombia, Mexico, Nigeria, Paraguay, Peru and the U.S. He said its satellite-manufacturing facility in Florida has capacity for up to 15 per week and it has 74 satellites in orbit.
OneWeb had expected that over 2020, it would do monthly launches to complete its 648-satellite constellation. It raised money to meet its launch and constellation and implementation schedule and hired Guggenheim Securities in February to help with its exhausted equity and debt financing, Whayne said. Given onset of the coronavirus pandemic "and resulting shuttering of the global economy," current investors wouldn't commit to more and bridge financing wasn't available, he said. The company laid off 90% of its workforce and ended nonessential operations, he said. It filed bankruptcy to get "the necessary breathing space to wait-out the current instability of the financial markets as they respond to COVID-19 pandemic," so it can then market and sell its assets, he said.