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OneWeb satellite
An artist’s conception shows a OneWeb satellite in orbit. (OneWeb Illustration)

Intelsat and OneWeb today laid out plans for a mega-merger aimed at bolstering their satellite internet services, with a $1.7 billion investment boost from SoftBank.

The arrangement is a head-turner, due to the complicated conditions of the deal as well as its ambitious objective. It comes just a couple of months after Japan-based SoftBank announced a $1 billion investment in OneWeb, which is gearing up to launch a constellation of satellites for global internet access.

“We believe that combining Intelsat with OneWeb will create an industry leader unique in its ability to provide affordable broadband anywhere in the world,” Intelsat CEO Stephen Spengler said in a news release.

Spengler is due to head the combined company, which will keep the Intelsat name and remain headquartered in Luxembourg. OneWeb’s founder and executive chairman, Greg Wyler, will be executive chairman of the combined company’s board.

SoftBank will purchase common shares in the company for $5 per share, and take a 39.9 percent voting stake. The $1.7 billion investment and a series of debt exchange offers are aimed at reducing Intelsat’s debt by up to $3.6 billion.

The merger and SoftBank’s investment arrangement are subject to shareholder approval. Intelsat said it expected the transaction to close late in the third quarter of 2017. The company’s share price dropped roughly 10 percent this morning, trading in a range between $4.93 and $5.63.

Intelsat, a global pioneer in satellite communications, was an early investor in OneWeb’s plan to put hundreds of small satellites into low Earth orbit to transmit and receive broadband data. Other investors include SoftBank as well as Airbus, Qualcomm, Virgin and Coca-Cola.

SoftBank’s investment made a splash in December because it counted toward a pledge that the company’s chairman and CEO, Masayoshi Son, made to then-President-elect Donald Trump to put $50 billion into U.S. companies.

Airbus is taking the lead role in designing OneWeb’s 330-pound satellites, while Arianespace and Virgin Galactic are on board to launch them starting next year. Wyler said the merger and SoftBank’s support should accelerate OneWeb’s mission of “bridging the digital divide by connecting the 4 billion people without access today.”

OneWeb facility in Florida
An artist’s conception shows OneWeb’s production facility in Exploration Park, Fla. (Graphic via Business Wire)

OneWeb isn’t the only venture targeting underserved internet markets. SpaceX is moving ahead with plans to put more than 4,000 satellites into orbit to provide broadband access, and recently expanded its Seattle-area operations to ramp up the effort.

The Boeing Co. also has floated plans for a global satellite network.

There’s another Seattle-area angle to SoftBank’s investment: Son’s company holds a majority stake in Sprint, and he previously sought unsuccessfully to merge the Kansas-based telecom provider with T-Mobile, which is based in Bellevue, Wash.

In the wake of Son’s pledge to amp up SoftBank’s U.S. investment, Reuters reported that SoftBank may pursue a new strategy to bring about a merger between Sprint and T-Mobile.

It’s unclear how far that strategy can go, at least in the near term. T-Mobile CEO John Legere told CNBC that he was “humored by this conversation that’s going on. … Nobody’s talking to anybody.”

Today, Son said that the Intelsat-OneWeb deal was just one piece of his plan to capitalize on a “technological revolution.”

“This combination is consistent with SoftBank’s strategy of investing in disruptive, foundational technologies that are building the infrastructure for tomorrow,” Son said.

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