Satellite-based Internet Service Provider OneWeb has signed a definitive agreement to merge its business with Intelsat, a communications satellite service provider, both companies said in a statement yesterday. The size of the deal was not disclosed, however, both companies will look to merge in a share-for-share transaction.

Note that Bharti Enterprises (Airtel’s promoter group company) had earlier invested $500 million into One Web in 2015.  At that time, the company said that if an Airtel user walks near one of its terminals and if there is no cell tower around, the phone will connect to a OneWeb terminal and operate normally, charging the user through operator billing.

Softbank to invest $1.7 Billion

In addition, investment firm SoftBank which had earlier invested $1 billion in OneWeb, also entered into a definitive share purchase agreement wherein it has pledged to invest $1.7 billion in newly issued common and preferred shares of the merged entity. The merger deal and Softbank investment will be subject to all regulatory and shareholders’ approval. Apart from SoftBank, other investors in OneWeb include Airbus, Bharti, Coca-Cola, Hughes, Intelsat, MDA, and Virgin. While securing $1 billion from SoftBank last year, the company’s valuation reportedly shot up to $2.5 billion.

Apart from this, the proceeds of the Softbank investment will be used to cut Intelsat’s debt by approximately $3.6 billion. Intelsat’s CEO Stephen Spengler said that “the transaction (merger deal), including SoftBank’s investment, will significantly strengthen Intelsat’s capital structure and accelerate our ability to unlock new applications, such as connected vehicles, as well as advanced services for existing customers in enterprise, wireless infrastructure, mobility, media and government sectors.”

How OneWeb will provide global Internet access via satellites

OneWeb plans to provide global Internet access using a series of 648 satellites by 2027 and will also look to bring connectivity to every unconnected school by 2022.  OneWeb said that it will launch 10 satellites initially, which will carry out detailed testing, and six months later it plans to initiate the launch of the full project. The aim is to start providing low latency broadband access at Gigabit per second levels by 2019.

Spectrum will be taken from unlicensed frequencies or through partnerships with telecom operators. OneWeb will install small cell terminals at ground locations, which will connect to its satellites and transmit Internet to surrounding areas via operator owned LTE, 2G and 3G networks or via WiFi. Terminals installed by OneWeb can also be used as Internet access points for schools, hospitals, for weather and navigation systems, and to provide emergency services in areas affected by natural disasters.