Investing in Space

OneWeb's internet satellites caught in UK-Russia standoff days before launch

Key Points
  • Russian space agency Roscosmos is refusing to launch the next batch of 36 OneWeb internet satellites unless the company meets the state agency's demands.
  • OneWeb's mission was scheduled to liftoff on a Russian-built Soyuz rocket on March 4 from Baikonur Cosmodrome in Kazakhstan.
  • Roscosmos is demanding that the U.K. government sell its stake in OneWeb and that the company guarantee that the satellites will not be used for military purposes.
  • U.K. Business and Energy Secretary Kwasi Kwarteng said in a statement that there is "no negotiation" with Roscosmos about OneWeb and that the government "is not selling its share."
A Soyuz 2 rocket launches 36 OneWeb satellites on March 25, 2020 from Vostochny Cosmodrome, Russia.

The corporate internet space race has taken a geopolitical turn.

Russian space agency Roscosmos is refusing to launch the next batch of 36 OneWeb internet satellites as scheduled for Friday, unless the company meets the state agency's demands. Roscosmos head Dmitry Rogozin said the ultimatum is a response to U.K. sanctions against Russia over its invasion of Ukraine.

Roscosmos said in a statement on Wednesday that the Soyuz rocket will be removed from the launchpad at Baikonur Cosmodrome in Kazakhstan unless OneWeb meets two demands:

  • The U.K. government sells its stake in the company.
  • OneWeb guarantees that the satellites not be used for military purposes.

U.K. Business and Energy Secretary Kwasi Kwarteng said in a statement that there is "no negotiation" with Roscosmos about OneWeb and that the government "is not selling its share."

"We are in touch with other shareholders to discuss next steps," Kwarteng said.

In turn, Rogozin responded to Kwarteng by saying he would give the U.K. two days to think about its decision, and implied that OneWeb would not be able to complete its satellite network without Roscosmos' help.

OneWeb's chief of government, regulatory and engagement Chris McLaughlin told CNBC that in the meantime, the company has removed its personnel from Baikonur Cosmodrome – as Russia leases the spaceport. McLaughlin said OneWeb's team on site, as well as a U.S. State Department security representative, are now all safely offsite and relocated elsewhere within Kazakhstan.

"We've not been complacent – we've been looking after, as a priority, the safety and security of our people and of our compliance with ITAR [International Traffic in Arms Regulations]," McLaughlin said.

Arianespace, a subsidiary of European rocket builder ArianeGroup, has also relocated its personnel in coordination with the OneWeb teams. The company sells rockets, including the Soyuz, that are supplied by Roscosmos for OneWeb launches. Arianespace declined CNBC's request for comment on the situation.

A stack of 36 OneWeb satellites being prepared ahead of its launch on March 25, 2020.

OneWeb has launched 428 satellites to low Earth orbit on Soyuz rockets and plans to operate a constellation of 650 satellites to provide global internet coverage from space.

McLaughlin said that OneWeb has been receiving information about the situation the same way that the public is: through tweets by Roscosmos and Rogozin.

"It's all we're getting," he said. "It sounds crazy but I've seen the letters [to OneWeb from Roscosmos], and the letters say nothing that isn't already in the tweets."

As McLaughin understands it, Roscosmos will have a meeting on Friday evening, at which point — if the demands aren't met — the Russian space agency would formally declare it's not launching the OneWeb mission, roll the rocket back from the launchpad and disassemble it.

OneWeb's satellites arrived in Kazakhstan before Russia invaded Ukraine, and McLaughlin explained that all the parties involved decided to continue moving forward as "this particular launch was not subject to any sanction."

"Yesterday, they were looking forward to launching us," McLaughlin said.

In the event Russia cancels the launch, McLaughlin says the contracts between OneWeb, Arianespace, and OneWeb are "all to be discussed" and anticipates each party will point to "force majeure."

"I've just got a visual of that Reservoir Dogs scene, where everyone's pointing guns at everyone," McLaughlin said.

OneWeb's multinational sprawl

Space companies have been racing to build next-generation satellite internet networks, largely in low Earth orbit using hundreds or thousands of satellites. OneWeb is one of the most mature versions of these concepts — alongside SpaceX's Starlink — and has already begun to provide service to customers.

OneWeb's business depends on multinational cooperation with a diversity of stakeholders across the world. The company was rescued from bankruptcy in 2020 when the U.K. government and Indian telecommunications conglomerate Bharti Global each took equity stakes to finance the company's network. It also counts among its stakeholders Japanese investment giant SoftBank, European communications firm Eutelsat and South Korean conglomerate Hanwha systems.

McLaughlin said that OneWeb's shareholders expect to hold an emergency meeting in the coming days to discuss the Roscosmos standoff.

The company's supply chain is also global: OneWeb's satellites are manufactured in Florida through a joint venture with European aerospace giant Airbus. Its launches are conducted through Arianespace on Russian-built rockets. Countries require regulatory approval for the company to provide service.

By contrast, SpaceX is a private, heavily-verticalized U.S. venture. Elon Musk's company builds and launches Starlink internet satellites itself. SpaceX provides Starlink service in more than two dozen countries.

The company recently activated service in Ukraine in response to requests from the government. SpaceX also sent Starlink terminals to Ukraine, with the antennas helping to connect the country to the internet amid the Russian invasion.

McLaughlin said OneWeb is not providing services in Ukraine because "we're still early stage," and also does not have ground stations in Russia.

"We weren't in a position to assist in the way that Musk went ahead and did," McLaughlin said.

SpaceX is a leader in rocket launches, but Starlink is its golden ticket

As a result, the Ukraine conflict is likely a boon for Musk's company over the likes of OneWeb, Deutsche Bank analyst Edison Yu wrote in a note on Wednesday.

"In the near-term, the clearest winner is SpaceX considering it essentially becomes the only viable backup option for any entity that was reliant on Russian Soyuz rockets," Yu wrote in a note to investors.

Yu highlighted Rocket Lab as another potential beneficiary, saying the company's Electron rocket "could potentially take over some small payload launches." Meanwhile, Yu emphasized that "the biggest losers would likely be the European Space Agency, OneWeb, and the International Space Station given heavy Russian cooperation."

Clarification: This story was updated to reflect the role of Arianespace as an ArianeGroup subsidiary.