Intelsat-OneWeb Merger Collapses

Intelsat has announced that its planned merger with startup satellite Internet provider OneWeb has collapsed.

The complex deal put together by Japan’s SoftBank Group Corp would have required holders of Intelsat’s $14 billion debt to accept discounts on what they are owed. The proposed debt swap found no takers prior to the May 31 deadline for accepting it. Intelsat and OneWeb had extended the deadline several times.

“Even without a merger of our companies, the pre-existing commercial agreement among Intelsat, OneWeb and SoftBank will continue,” Intelsat said in a statement. “Under this agreement, we plan to jointly develop integrated solutions utilizing both of our fleets and to act as a sub-distributor to SoftBank for the attractive application segments of mobility, energy, government, and connected car.”

Intelsat’s press release follows.

Intelsat Announces Termination of Debt Exchange Offers and Anticipated Termination of Conditional Combination Agreement with OneWeb and Share Purchase Agreement with SoftBank

LUXEMBOURG 1 June 2017 – Intelsat S.A. (NYSE: I) (“Intelsat”) today announced that the previously announced (i) offer or offers to exchange (collectively, the “Exchange Offers”) certain of the respective outstanding senior unsecured notes (the “Existing Notes”) issued by its indirect wholly-owned subsidiaries, Intelsat Jackson Holdings S.A., Intelsat Connect Finance S.A., and Intelsat (Luxembourg) S.A. (collectively, the “Issuers”) and (ii) solicitation or solicitations of consents (collectively, the “Consent Solicitations”) to amend the indentures governing the Existing Notes expired pursuant to their terms at 12:00 midnight, New York City time, on May 31, 2017. As of the expiration date, the minimum tender conditions for the Exchange Offers and Consent Solicitations had not been satisfied. The Issuers have not accepted any of the Existing Notes for exchange, any Existing Notes tendered for exchange will be promptly returned to holders, and the Exchange Offers and Consent Solicitations have accordingly been terminated.

The Exchange Offers and Consent Solicitations were conducted pursuant to the Combination Agreement, dated as of February 28, 2017 (as amended by that certain First Amendment to and Waiver Relating to the Combination Agreement, dated May 17, 2017, the “Combination Agreement”), between Intelsat and WorldVu Satellites Limited (“OneWeb”), pursuant to which Intelsat and OneWeb would combine through a merger, and the related Share Purchase Agreement, dated as of February 28, 2017 (as amended by that certain First Amendment to and Agreement Relating to the Share Purchase Agreement, dated as of May 17, 2017, the “Share Purchase Agreement”) among Intelsat, SoftBank Group Corp. (“SoftBank”) and OneWeb, pursuant to which SoftBank would make a cash investment in exchange for common and preferred shares of the combined company contemporaneous with the closing under the Combination Agreement. The successful completion of the Exchange Offers would have satisfied a condition to completion of the transactions under the Combination Agreement and the Share Purchase Agreement. Intelsat has notified OneWeb and SoftBank of the failure to consummate the Exchange Offers.

As a result of the termination of the Exchange Offers, Intelsat currently expects that OneWeb and SoftBank will exercise their respective termination rights under the Combination Agreement and related Share Purchase Agreement on June 2.

Intelsat CEO Stephen Spengler said, “There were many stakeholders’ interests that needed to be satisfied in this complex transaction. We are disappointed that our bondholders were unwilling to accept the terms of the exchange offers presented over the course of this process. Even without a merger of our companies, the pre-existing commercial agreement among Intelsat, OneWeb and SoftBank will continue. Under this agreement, we plan to jointly develop integrated solutions utilizing both of our fleets and to act as a sub-distributor to SoftBank for the attractive application segments of mobility, energy, government, and connected car. As we create integrated services for these applications, we expect to accelerate and enhance our goal of unlocking new and larger opportunities in the communications landscape. We remain focused on achieving our operating priorities for 2017, including the continued commercialization of our Intelsat EpicNG high throughput satellite services.”

  • JamesG

    wa wa wa… I guess no one wanted to be left holding the bag after this shell game was done.

  • The same investors probably got burner on dotcom business mergers like the disastrous AOL-Time Warner merger. Maybe the space bubble will go better than the dotcom and housing bubbles?

  • satman

    Intelsat is in trouble on its own with a massive debt load and revenues spiraling downward. Too much transponder capacity available to maintain the old rip off pricing model. ViaSat is going to clean Intelsat’s clock. It’s hard to see OneWeb ever being profitable…. another Iridium in the making.

  • JamesG

    With massive orbital debris contamination as extra bonus feature!

  • Iridium is doing just fine, thank you very much. OneWeb is just trying to go straight to the end of Iridium’s successful model: START with junk bonds you never expect to pay, take all the investors’ money and then be acquired by someone with more money so you can actually be profitable. It’s a MUCH more streamlined process than planning to actually make money and pay off the original investors.

  • satman

    Brilliant comment on Iridium. The history on LEO constellations is fraught with financial ruin. Teledesic actually tried to create a real satellite carrier and when the numbers didn’t crunch, Gates and McCaw pulled the plug. These days it’s all funny money anyway until interest rates go up.

  • That’s the reason I don’t “believe” in the modern mega-constellations. The people who need constant coverage already have it, and several options to boot, AND it has created enough of a market to keep Iridium/OrbComm/others alive.

    Iridium/Teledesic/etc. all were born out of the idea of constant contact EVERYWHERE, which most people don’t need. The megas are offering BROADBAND EVERYWHERE, I just don’t see the market.

  • ReSpaceAge

    Enter SpaceX with their cheaper model and reusable rockets.

  • satman

    VIaSat will have it all covered with Ka spot beams when ViaSat 3 launches. With fast codecs/eco cancellers the geo signal propagation delay becomes mute. LEO will never be able to compete with GEO in terms of cost per bit.

  • satman

    I wonder if the SpaceX LEO business plan is similar to Tesla’s and Solar City’s?

  • duheagle

    In the U.S. most broadband is provided by cable TV systems. These are nearly always monopolies because that’s how the local politicians want things. When I can get broadband from the sky with no reference to my local cable monopoly, I’m going to be the damned market. Me and millions like me.

  • duheagle

    Propagation delay is always a consideration for real-time apps. Flying drones and shooting at stuff comes to mind. As for cost per bit, I really don’t see how GEO is, in any way, inherently cheaper than LEO. At least pretend to spitball some numbers if you expect anyone to take statements like that seriously.

  • duheagle

    SpaceX and Tesla business plans:

    1) Shake up a “mature” industry by doing something nobody’s ever done before.

    2) Be mercilessly mocked and trash-talked for doing so.

    3) Make out like a bandit anyway.

    Yeah, I think the LEO broadband business plan is pretty much just like that.

  • Look at cord cutting though. You can cancel cable and pay for Hulu/Netflix/HBO/etc. If you add up all those costs, it’s JUST AS EXPENSIVE! It’s maddening.

    Current satellite internet is just as expensive as cable. Cord cutting is as expensive as cable tv. DSL internet is as expensive as cable.

    Just because another option comes along, doesn’t mean it’ll be any cheaper.

  • duheagle

    I think a lot of the commenters here are missing something key. The failure of this merger plan is not due to the OneWeb part, it’s due to the Intelsat part. Satman is the only one to mention this not-so-little detail. As near as I can make out, this whole scheme was basically a way for Intelsat to try getting its existing investors and bondholders to voluntarily take a haircut of known magnitude in exchange for avoiding a quite possible future involuntary haircut of unknown magnitude. The carrot was getting a ground-floor piece of something new that has good prospects.

    Apparently the upside of OneWeb wasn’t enough to seal the deal for Intelsat’s current investors. That is certainly not logically equivalent to the OneWeb proposition being a bad one when considered on its own stand-alone merits. This isn’t the 90’s. OneWeb is not even Iridium, never mind Teledesic. As Einstein said, for everything there is an hypothesis that is simple, straightforward, elegant – and wrong.

  • duheagle

    Yes, there are alternatives for TV. But not really for broadband internet. If all you want is TV, a small dish is fine. For internet, not so fine.

    DSL has never been very available and, given it’s serious inferiority to TV cable as a medium, it hardly matters what it costs. It’s never been available at any price in my area. Being terrestrial, DSL is still at the mercy of greedy local politicians who want to keep their tax revenue and political extortion – uh – contributions coming in. It wasn’t, isn’t and won’t ever be any kind of solution to the real problem.

    A number of schemes have been floated for terrestrial wireless broadband systems. All have failed to get traction because they all still require infrastructure in the service area and the local politicos won’t approve installing it. Only a LEO constellation really provides a potentially viable alternative. Part of the viability of said alternative is that it has to be at least a bit cheaper or not enough people will bother to make make the switch.

  • JamesG

    Or if you have your due-diligence glasses on, a haircut of known magnitude at the cost of taking on a speculative startup business that may plunge the company even faster into oblivion unless the rosy song-and-dance story the OneWeb and SoftBank execs were selling comes true.
    In reality you have two companies that are highly leveraged in real terms with marginal future business prospects that both need to find a way to wring the lemon a little more so they can keep the lights on. Oh and Softbank maneuvering itself to be majority stakeholder so that if/when liquidation comes, they will still come out ahead.

  • satman

    You can swag the numbers yourself. A $500 million dollar geosat (spacecraft and launch to orbit) with a 15 year life span is going to produce a lower cost per bit/per Hz./per year than a constellation of 2000 LEO’s that constantly need to be replaced. Then there’s the VSAT price. Under $2k installed for ViaSat. OneWeb…unknown.

  • satman

    We’ll see how it plays out for Musk Inc. Tesla is a mirage created by vast amounts of US government funding. I like SpaceX and their ingenuity and I hope they make it. If Musk is smart he’ll stay out if the LEO business and let OneWeb fail first.

  • One of the early Iridium engineers called it “Iridium Winter”, he wasn’t at the company very long.

    These new mega constellations take that up to 11!

  • JamesG

    Not just US, there was a piece on Bloomburg today about how electric car sales are crashing (-60% for the yr.) in Denmark because the government is trying to phase out the generous incentives and subsidies advantage they were giving them.

  • windbourne

    you know, I am AMAZED at the number of ppl that continue to bet against Musk who has shown over and over and over that he knows what he is doing.

  • windbourne

    exactly.
    I know that if he can really hold down the ping time, and give us GB connections, I will buy.

  • windbourne

    yup. EVs sales have crashed at times. And yet, Tesla’s CONTINUES to increase sales.

  • satman

    I’m a SpaceX fan. I just hope he doesn’t bite off more than he can chew with a LEO constellation. It will be interesting to see if Wyler does a deal with SES. SoftBank will be anxious until another big player comes on board the project. If it’s SES, watch Intelsat stock take a hit. VIaSat was up big today.

  • JamesG

    EV sales are crashing. Right now. The local Nissan dealer is giving Leafs (leaves?) away if you buy a real car from them.

    And Tesla is notoriously “creative” with its sales figures. Made a profit yet?

  • therealdmt

    “Yes, there are alternatives for TV”

    Yep — turn off your TV; problem solved. Seriously, that’s what I did long ago. I like some sports and a few shows, so I stream them over the Internet. Otherwise, good riddance. Works for me, anyways

    However, the wife’s not fully onboard with all that — she’s got a satellite dish for her TV… 😜

  • duheagle

    Not really. I’ve got cable in order to have broadband Internet. There isn’t any way to “turn off” just the TV. So I have to pay for the whole nine yards or do without broadband. Hence my eagerness for the appearance of a genuine broadband alternative that doesn’t involve having to buy things I don’t want – and also doesn’t involve having to pay for all the baksheesh going to my local crooked politicos.

  • duheagle

    The target price for antennas for these smallsat broadband constellations is about a 1/10 of that dish price you quote. They’ll get takers.

  • OldCodger

    Profit is what the accountant tells you it is! Free cash flow and dividends are the only real money!

  • windbourne

    Tesla is not trying to make a profit.
    They are trying to grow the company quickly so as to force the industry to change, while at the same time, making it possible to be profitable with lower priced cars against comparative ICE vehicles.