Musk is ‘changing the way we think about risk’: Satellite incumbent plans fightback against Starlink

PARIS — Eutelsat is one of the biggest satellite companies in the world, but has faced declining revenue in its traditional businesses at a time when it is handling a huge acquisition and facing disruption from billionaires Elon Musk and Jeff Bezos.

Eutelsat CEO Eva Berneke is betting on that massive acquisition of a British firm called OneWeb to turn around the company’s fortunes.

“OneWeb is the big bet,” Berneke told CNBC in an interview this week at the VivaTech conference in Paris.

Eutelsat makes most of its money from satellites that provide connectivity to broadcast operations like TV networks. But that revenue is slowly declining. These so-called geostationary or GEO satellites is what Eutelsat specializes in.

OneWeb, a British company, specializes in so-called low Earth orbit, or LEO satellites, which are used for things like internet connectivity.

By combining Eutelsat’s legacy GEO business with the LEO business of OneWeb, Berneke feels like it could be a big advantage.

“[What ]OneWeb brings is a low orbit constellation, a bit like Starlink, where we can then start combining the two networks with a GEO plus LEO network,” Berneke said.

OneWeb, a direct competitor to Elon Musk’s Starlink, which counted Japanese giant SoftBank among its investors, filed for bankruptcy in 2020. The U.K. government at the time invested in the company to save it. Eutelsat announced last year it would acquire OneWeb.

Starlink aims to create a constellation of satellites that provide internet connectivity on Earth.

Over the last year, Eutelsat shares have fallen roughly 50% on the big changes taking place at the company. Eutelsat suspended its dividend last year to focus on investment in OneWeb and its new satellites known as “Gen 2.”

Berneke admits this has upset shareholders but there are new investors coming into the stock.

“We’ve seen some pushback from shareholders. And that has to do with a bit of a big change. Eutelsat used to be a company paying very high dividends with a very stable cash flow, but not a lot of growth. And what we’re telling them now is that with this merger, we’re going to be a high growth company,” Berneke said.

“We’re going to stop paying any dividend. And they should see that returns coming back once we’ve paid 4 billion [euros] for Gen 2 [satellites]. So that’s a bit of 180 degree, which means that a lot of, especially the shareholders who are there who liked the annual dividend, are saying, ‘well, maybe we’ll take our retirement money somewhere else and go there’.”

Berneke revealed to CNBC that the company plans to dual list on the London Stock Exchange as soon as the OneWeb deal is closed.

Part of Eutelsat’s hope with OneWeb is that it will help the company compete with Musk’s Starlink as well as Jeff Bezos and Amazon’s effort with Project Kuiper. The latter is also attempting to launch satellites for internet connectivity.

“We just have the two biggest business innovators coming in and saying, ‘oh, this is an interesting space, I can do something here. I can actually industrialize this niche.’ And I think that’s what Elon Musk needs to have a lot of credit for doing, really shaking up this,” Berneke admitted.

Many Eutelsat shareholders see the OneWeb acquisition as a risk. But Berneke said that Musk has changed the way businesses think about risk.

“Elon Musk is changing the way we think about risk broadly in business, I think one of the great things he’s ready to do is putting his money behind taking risks and moving fast forward,” Berneke said.

“One of the things we need to start doing is taking a measured risk, but also be able to move forward superfast and learn from those risks.”