The British satellite company OneWeb and its French rival Eutelsat have announced they have signed an initial merger deal that could help them challenge the likes of the Elon Musk-owned SpaceX’s Starlink. The transaction, following reports that both companies were in tie-up talks, values OneWeb at $3.4bn (£2.8bn). It would be structured as an exchange of OneWeb shares by its shareholders with new shares issued by Eutelsat, leaving the latter owning 100% of OneWeb. A deal would combine the companies’ resources in the race to build a constellation of low-orbit satellites. It is also potentially sensitive politically, as it would bring together the Indian billionaire Sunil Bharti Mittal, along with France, China and the UK, as shareholders of the combined group. Demand for satellite launches is expected to accelerate after recent sanctions sidelined the Russian space launch industry, and giant satellite constellations could offer a new channel to beam broadband internet from space. Eutelsat and OneWeb said their new, combined entity would have revenue of about €1.2bn (£1bn) and core earnings of about €700m by the 2022-23 financial year, while revenue was forecast to grow at a low double-digit compound annual growth rate over the next decade. Eutelsat’s Dominique D’Hinnin would be chair of the combined entity. OneWeb’s Sunil Bharti Mittal would be co-chair, while Eva Berneke would be chief executive.