OneWeb takeover by Chinese state-backed rival raises national security concerns
The proposed takeover of British satellite darling OneWeb by French rival Eutelsat has caught scrutiny over national security.
The joint company, estimated to be worth around $6bn (£4.9bn), would create a satellite and communications powerhouse to compete against Elon Musk’s SpaceX and Starlink – which currently dominates the satcoms industry.
Eutelsat, which is partly owned by China Investment Corporation (CIC) – a sovereign wealth fund which manages part of the People’s Republic of China’s foreign exchange reserves – confirmed it had been in talks with Britain’s satellite darling today, following reports last night.
The CIC is a passive investor and does not have influence over board decisions.
However, in light of geopolitical tensions with China, the takeover is expected to get hung up by the government’s newly imposed National Security and Investment Act.
The new law currently has the takeover of British computer chip manufacturer Newport Wafer Fab by Nexperia – partly owned by Beijing-backed Wingtech – stuck in the mud, as business secretary Kwasi Kwarteng considers whether to give it approval.
A government spokesperson said it will seek to “protect and maximise the value of our investment in OneWeb on behalf of the taxpayer” but declined to comment on the deal’s national security implications.
“There will be a balance between encouraging deals but also ensuring that national security is not impacted,” professor at Nottingham Law School, Rebecca Parry, told City PM “The National Security and Investment Act was supposed to be simple and quick but the Newport case shows that there can be political sensitivities.”
The UK government’s golden share in OneWeb, which means it has influence over investments and decisions such as where its headquarters are based, suggests it is less likely to reject the deal over fears of foreign influence.
Unlike recent defence and technology infrastructure deals that have fallen under scrutiny, it is unclear that a OneWeb merger with Eutelsat would face a similar fate, Andy Chambers, industrials analyst at investment research group Edison, added.
“The UK government is already a stakeholder with a golden share so presumably has been consulted in advance and a deal appears implausible without its consent in the first place,” he told City PM “It undoubtedly has to determine its view between the future funding burden for OneWeb on the UK taxpayer which could be alleviated with any overarching national security issues and priorities that would include Chinese involvement.”
Eutelsat currently holds 23 per cent of OneWeb’s share capital, alongside a consortium of high-profile public and private investors. Shareholders in Eutelsat and OneWeb would each hold 50 per cent of the combined group.
“The global satcoms industry is going through some seismic shifts, and the UK is at the epicentre of these changes,” said Mark Boggett, CEO of London-listed space-tech investment trust Seraphim Space, adding that “These companies represent real success for Global Britain.”