Caixin
Nov 28, 2019 08:36 PM
BUSINESS & TECH

U.K. Satellite Firm OneWeb Pushes Into China Market in Search of Scale

A model of a OneWeb satellite. Photo: IC Photo
A model of a OneWeb satellite. Photo: IC Photo

As the rollout of next-generation 5G networks accelerates around the world, competition between companies over communication space up in the sky has been quietly gaining momentum.

OneWeb, a U.K.-based private global player that focuses on providing communications networks through LEO (low-earth orbit) satellites, is looking to set foot in the massive Chinese market to scale up its business, according to Caixin interviews with its CEO and other industry insiders.

But as a Western firm that won’t be easy. OneWeb is yet to lock in the local partners it will need to stay within the law, and must tread carefully to avoid blowback from the powerful state companies that dominate the field.

Although broadband networks such as 3G and 4G are now used by the majority of the world’s population and regions, terrestrial telecom solutions are still not economically available to everyone or everywhere. About half of the world’s population are still living without broadband, statistics show.

LEO satellites, if successful in establishing networks in the lower earth orbit, will provide low-latency, high-speed services that fill in network gaps in specific areas of telecom use that broadband systems cannot service, including in aircraft, maritime fleets, and disaster relief situations.

Established in 2012, OneWeb is making its mark as a forerunner in this now more competitive telecoms field. After spending the past few years building satellite manufacturing facilities in the U.S. state of Florida, the company now has the capacity to build two satellites a day.

In the long term, it is planning for a constellation of 1,980 satellites for full global coverage, CEO Adrian Steckel told Caixin and other media in Beijing last week.

In its ambitious first phase, the company is aiming to install 648 polar orbiting satellites to start providing services by October 2021. Only six satellites are in orbit so far after an initial launch in February this year.

One of OneWeb’s major competitors, SpaceX’s Starlink project, has launched 120 satellites as part of its planned constellation of 7,518 satellites. Starlink was launched in 2015 by the Elon Musk-founded aerospace company.

OneWeb chief Steckel said his company was not too concerned about the competition. He believes OneWeb holds a unique position in the field with its own proprietary technology and services. And it has negotiated better and more spectrum resources from the International Telecommunication Union, the international standard-setter. He also believes the massive global demand for such networks can’t be fulfilled by just a few players.

Nevertheless, China is a market that OneWeb aims to tackle against the odds. As a foreign player, the company must find local business partners to satisfy national telecom sector policies before rolling out any initiatives in China.

However, even if OneWeb manages to find local partners, a smooth rollout of its business in such a massive country is not guaranteed, industry experts told Caixin. As a Western firm it will face mounting complexities of interests and conflicts from different parties, they said.

OneWeb’s goal is not to manufacture or seek financing in the world’s second largest economy. Like many other multinationals which hope to do business in a country known for its tough regulations, sharing a piece of the big pie is the key, Steckel said.

“The biggest attractiveness of the Chinese market is that it helps us to achieve scale,” he said in Beijing. “And scale drives down cost, which drives down price, which drives up adoption, and then, the circle continues.”

Earlier last week, OneWeb signed a framework cooperation agreement with the government of Sanya, capital of South China’s Hainan province. The company will build in Sanya its first satellite ground station in Asia while looking for appropriate locations for another two stations in the country.

Hainan was chosen as a starter for its location next to the ocean, but also because of free trade zone policies that make it a friendly operating environment, Steckel said. The other two stations are planned to be built in the northern and western regions of China, he said.

OneWeb has raised $3.4 billion so far, backed by a bunch of diversified shareholders including Japan’s SoftBank, the U.K.’s Virgin Group, France’s Airbus, America’s Qualcomm, and even the Rwandan government. But it still needs more capital.

In China, its search for business collaborators has not resulted in any solid deal. OneWeb is now in deep negotiations with China Telecom, one of the country’s three biggest telecom providers, according to its Greater China head, Alain Lejeune. But it has declined to disclose either the progress of talks or the names of potential Chinese partners it is considering.

Zhang Erchi contributed reporting

Contact reporter Isabelle Li (liyi@caixin.com)

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