Yahoo Finance How infighting and chaos scuppered race to build a UK space champion
Kanal PIK, a Georgian television channel, lasted just a fortnight before it was taken off air by the Kremlin.
It was 16 months after Russian tanks rolled into South Ossetia, in Vladimir Putin's brutal campaign on the former Soviet state, and hopes had been high that an independent Russian-speaking broadcaster could survive following a ceasefire in August 2009.
Kanal PIK had signed a five-year deal with French satellite operator Eutelsat to beam their broadcasts into the Caucasus region, but it was not long before media executives sensed things were going awry.
"First we received information that they had problems with our content," said public television head Gia Chanturia. "Then they said this wasn't the problem, that it was a technical issue. Then they said it wasn't a technical problem but a commercial issue."
Eutelsat had stopped transmitting the channel after signing a "lucrative contract" with Russian satellite company Intersputnik - one that promised the Georgian channel’s space to Kremlin-controlled Gazprom Media Group, representatives claimed.
The French company was a "tool of Russian censorship”, the channel said in a statement to AFP news agency. Eutelsat denied it had been pressured by Moscow.
Fast-forward more than a decade and Paris-listed Eutelsat is on the cusp of seizing control of rival satellite company OneWeb. The company was rescued by British taxpayers in 2020 to “put the UK at the forefront of space tech”, according to Boris Johnson, and take on Elon Musk’s starlink.
From a purely business perspective, even critics of the deal concede the takeover - or “merger” as it is officially being billed - makes sense.
Eutelsat owns 23pc of OneWeb and the two companies already work closely together on a series of contracts. Both are loss-making and the British Government has already signalled it is not prepared to pump more money into OneWeb.
In addition, Britain will retain its “golden share” with a series of commitments that are more substantial “than Rolls-Royce and BT”, Government sources insist. OneWeb’s headquarters cannot be moved from Britain, which would have the right of veto on lucrative satellite building contracts.
"The rationale for consolidation is strong,” says one industry source. “There is a logic to it, but Eutelsat and OneWeb merging is a much iffier proposition… OneWeb is unproven and is competing against some pretty tough rivals. Getting support from the EU is probably pretty smart.”
But the issues are more geopolitical. Simply put: the British Government is going to end up with its enemies, critics say.
Eutelsat has made little secret of continuing to support Russian media, leaving it open to allegations it is helping the Kremlin’s propaganda machine.
Some 6.3pc of the French company’s revenue is generated in Russia, Eutelsat’s finance chief Sandrine Téran told analysts in May - and the money is paid in roubles.
“We have a bank channel allowing us to receive the payment from our customers. And actually, we have received payments since the beginning of the crisis,” she explained.
“We are in a position to keep on delivering the service to our Russian customers who are not subject to sanctions.”
There is also a question mark over ownership. The UK government roughly 18pc stake, bought for £400m alongside Indian telecoms billionaire Sunil Mittal, would reduce to 9pc in the enlarged company.
It would sit beside a shareholding of between 2.5pc and 3pc owned by China - the country that Tory leadership hopeful Rishi Sunak on Monday said “represents the largest threat to Britain and the world’s security”.
"The China piece will create a real issue for the US,” the industry source says. "From a competition standpoint probably not a big deal. From a security standpoint it's a big deal.”
The question of why Britain wants to sell up after Johnson was so effusive two years ago is comparatively straightforward, insiders say.
With Dominic Cummings, Johnson’s former chief adviser, out of the picture and the Prime Minister on his way out, here was the chance for the powers in Whitehall to get rid of an investment many mandarins never wanted in the first place.
On technical grounds, the UK Space Agency said OneWeb’s plans presented major difficulties because its low-earth-orbit satellites may be unable to provide accurate location signals.
Whitehall beancounters agreed. “I cannot satisfy myself that this investment meets the requirements of value for money,” Sam Beckett, the Department for Business’s accounting officer, concluded in June 2020.
Meanwhile, Ben Wallace, the Defence Secretary, was reportedly not in favour of the UK government taking a stake in the company in the first place.
“The Ministry of Defence wasn’t planning to use it — we had no interest in it,” one senior official told the Financial Times. “Ben always thought it was a fantasy by Dominic Cummings because he was obsessed about space.”
Industry sources agree. “The general view is that government technical experts did not support the investment - they thought it was just a whacky Dominic Cummings thing. They can now unload it without responsibility for the investment.”
This view is borne out by the experience of company insiders. “Getting any traction from government departments was very difficult,” says one source. “And when you did, they expected OneWeb to give away its services for free.”
Another claims: “OneWeb isn’t run very well. Half the execs see it as a science project and the other half don’t really understand the market well enough.”
Whether it be from the UK government, the OneWeb boardroom or even from across the English Channel at Eutelsat, there has been a “high level of naivety” as to the geopolitical implications of the UK selling up.
The UK will have a seat on the Eutelsat board, alongside a representative from the French government. It remains to be seen whether the Chinese, currently Eutelsat’s four-biggest investor, could also demand a representative in the boardroom.
Meanwhile, it seems unlikely that British taxpayers would be happy to go along with accepting roubles while Putin continues to attack Ukraine.
Whitehall officials this weekend said OneWeb’s technology would be ring fenced to ensure it is not used to support channels that facilitate Kremlin propaganda.
This notion was scoffed at by company insiders. “It's not about ring fencing the technology - the US would never let it be used in Russia anyway,” one says. “At the very least, the UK is still going to be a shareholder in a company working with Russia.”
