(Bloomberg) -- The U.K. government and Indian telecommunications tycoon Sunil Mittal won an auction for bankrupt satellite operator OneWeb, taking Britain a step closer to relaunching its post-Brexit space ambitions.
An arm of Mittal's Bharti Enterprises Ltd. conglomerate and the U.K. will each commit $500 million in a deal expected to close by year end, the bidders said in statements on Friday. Each bidder will get a 45% stake in OneWeb with existing investors retaining 10%, a person familiar with the deal said.
Bharti will provide the company with “commercial and operational leadership,” while the U.K. government will have a say over any future sale of the company and will decide what countries can access London-based OneWeb's technology on national security grounds, the bidders said.
A spokesman for OneWeb declined to comment on the size of the holdings. A representative for the U.K. government didn't immediately respond to a request for comment, and a spokesperson for Bharti didn't immediately reply outside of regular business hours.
OneWeb has been building a constellation of low-Earth orbit satellites to provide internet services outside urban areas. It had raised about $3.3 billion in debt and equity financing from shareholders including SoftBank Group Corp., Airbus SE and Qualcomm Inc. before it collapsed into bankruptcy in March.
“Our access to a global fleet of satellites has the potential to connect millions of people worldwide to broadband, many for the first time,” Business Secretary Alok Sharma said in the statement. “The deal presents the opportunity to further develop our strong advanced manufacturing base right here in the U.K.”
Part of the U.K.'s interest in supporting OneWeb is to form the basis for a new national navigation system after the European Union froze Britain out of the most secure elements of the bloc's similar project, called Galileo. Prime Minister Boris Johnson is trying to attract fresh foreign investment from countries including India, China and the U.S. to help offset the U.K.'s departure from the EU.
In its bankruptcy announcement, OneWeb blamed the market turbulence related to the Covid-19 pandemic for its failure to obtain the funding it needed.
Read more: Bankrupt OneWeb Needs $2.5B to Finish Satellite System: Lawyer
The commercial prospects of projects like OneWeb are unclear, with uncertainty over whether they can deliver products such as competitive broadband in rural areas and still turn a profit after requiring heavy investments.
The project faces competition from deep-pocketed rivals developing similar small-sat constellations including Elon Musk's SpaceX Starlink and Jeff Bezos's Amazon-linked Project Kuiper, as well as from incumbents such as Inmarsat, Intelsat SA and Eutelsat Communications SA.
“The government has increased ambitions for space and we are working to strengthen our national capabilities, create high-skilled jobs and drive further growth in the U.K. space sector,” said Graham Turnock, chief executive of the U.K. Space Agency. “Now is the right time to look at new ways to use space to boost the U.K.'s prosperity, security and global influence, while benefiting people across the whole country.”
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