Taxpayers facing £200m loss on satellite venture OneWeb after Dominic Cummings-engineered rescue

The British taxpayer is sitting on a £200m paper loss from the bailout of satellite company OneWeb after it was rescued by the Government during the pandemic.

The value of the Government’s stake in OneWeb has more than halved since it merged with Eutelsat, a Paris-listed space company, in an all-share deal.

OneWeb was rescued by the Government in 2020 after it filed for bankruptcy. The surprise decision to bail out the satellite company was driven in part by Dominic Cummings, who was at the time a key adviser to Prime Minister Boris Johnson.

The rescue was prompted by fears China could seek to take control of the struggling business.

It was also seen as a strategically significant venture. The company, which competes with Elon Musk’s Starlink, has so far launched more than 640 low-earth-orbit satellites designed to provide connectivity in remote areas. 

OneWeb’s technology has been trialled in the UK for providing rural broadband.

The British government injected roughly £400m into OneWeb, which also received further funding from Indian telecoms company Bharti.

Eutelsat announced plans to merge with OneWeb last year and completed the deal in September. 

However, the French company’s share price has collapsed since the deal was first announced, leaving taxpayer’s shareholding of the combined business worth less than half what was invested into OneWeb.

The sell-off has left the taxpayer with a stake in the French company now worth around €225m (£195m). Eutelsat’s share price is down by around a quarter since the deal completed.

The British government holds roughly an 11pc stake in the combined satellite business and has a board seat, as does the French government.

Eutelsat’s shares had been trading above €10 before news of the OneWeb deal emerged last year. However, the stock tumbled to a record low of €3.70 earlier this month. The shares closed at €4.36 on December 22.

Eutelsat has come under pressure after investors baulked at the OneWeb deal, which valued the British business at $3.4bn (£2.7bn).

OneWeb will require as much as $4bn to build a new generation of satellites, a sum that has sparked concern among Eutelsat’s shareholders as rising interest rates make investment more costly.

In November, analysts at Fitch downgraded their rating of Eutelsat’s debt, warning the company now had “significantly increased execution and free cash flow risks” following the merger.

The analysts added that Eutelsat faced increased competition with Elon Musk’s Starlink. The billionaire has launched thousands of satellites into earth’s orbit to provide broadband connectivity in direct competition with OneWeb.

Under the leadership of chief executive Eva Berneke, Eutelsat is hoping to at least partly fund the cost of upgrading OneWeb with funds from a major EU space project.

The European Commission hopes to build a domestic rival to Starlink so it will not be forced to rely on the erratic Mr Musk. Satellite broadband has proved a crucial capability in recent conflicts, such as the war in Ukraine.

Eutelsat is now worth less than €2bn even after its merger with OneWeb. Meanwhile, Mr Musk’s Starlink has been sounding out investors about a funding round that would value his company at $180bn.

An industry source said: “Eutelsat has to get the EU project.”

The commission is considering potential pitches for the multibillion euro satellite project. However, officials have previously said they were wary of OneWeb’s involvement, since the UK holds a board seat and a veto over certain business deals.

In its first quarter results in October, Eutelsat reported a 4.7pc decline in its revenues. However, it claimed OneWeb had orders totalling $1bn for its satellite network.

A government spokesman said: “Share prices fluctuate in the short term but this was a long-term investment.”

For a while, the value of the Government’s stake edged up after OneWeb brought on board new investors, including Japan’s SoftBank and later Eutelsat.