*

'Project Bromo' seeks to counter competition from China,

U.S.

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Negotiations have regained momentum after stalling,

sources say

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Political approval and final ownership details are still

pending

By Amy-Jo Crowley, Mathieu Rosemain and Tim Hepher

LONDON/PARIS, Sept 12 (Reuters) - Europe's aerospace

groups Leonardo, Thales and Airbus have redoubled efforts to

combine their satellite businesses into a 10 billion-euro ($11.7

billion) joint venture and are working towards hammering out an

initial agreement in coming weeks, sources close to the matter

told Reuters in recent days.

Under "Project Bromo," named after an Indonesian volcano, the

three companies plan to set up a satellite manufacturing company

to compete with rivals from China and the U.S., including Elon

Musk's Starlink. Talks have regained momentum after a rough

period in the summer when the parties could not agree on

governance and valuation, stalling an agreement, three sources

said. The talks looked at risk of collapsing, according to

another source.

A memorandum of understanding could now be signed by the end

of September, though the timing could slip, the sources said.

Political signals so far have been encouraging, but details

of ownership and governance must be signed by nations involved,

three of the sources said. The venture is expected to include

dedicated entities to protect sensitive national interests.

An agreement is not guaranteed, and talks could still fall

apart, the sources warned.

The exact holdings of the new space venture are still being

negotiated, the sources said, adding that ownership of the

venture could be split roughly in three equal parts.

The new satellite venture value of about 10 billion euros

reflects the units' combined revenue of 6 billion-6.5 billion

euros and sector peers, which trade at 1.5-3 times revenue, the

two sources said.

A spokesperson for Leonardo declined to comment.

Airbus referred to comments from CEO Guillaume

Faury, who said earlier this week the companies were moving

towards a deal and talking to European governments on the

venture. "We are on the way," he told a group of reporters in

Washington.

"We have started also to communicate with all stakeholders

and we have started to try for anti-trust (approval), so we are

in the process of doing it," Faury added.

Thales said: "No agreement has been reached at

this stage. We are continuing our work. Any further comment

would be premature."

Preliminary attempts over the past decade to create a

European satellite champion foundered partly on anti-trust

concerns and national rivalries. But the dramatic rise of

Starlink and a shift in the market towards cheaper, low-orbit

satellites have increased pressure on Europe's main suppliers to

combine assets or be pushed out of the market.

Talks to reshape the industry's structure are part of a broader

attempt by Europe to boost sovereign capabilities as

geopolitical tensions have mounted and U.S. policies have

shifted.

All three companies have minority government shareholders

and analysts say any agreement involving sensitive assets and

technology would need political approval.

Italy's industry ministry was not immediately available for

comment.

Germany's defense ministry did not immediately respond. A

spokesperson for France's state shareholding agency APE declined

to comment.

A potential deal would create a standalone European satellite

champion, based broadly on missile maker MBDA, owned by Airbus,

Leonardo and BAE Systems. MBDA was founded in 2001 through the

merger of Anglo-French Matra BAe Dynamics, France's Aerospatiale

Matra Missiles and missile activities of Anglo-Italian Alenia

Marconi Systems.

Reuters reported in June that Leonardo and Thales current joint

ventures - Thales Alenia Space and Telespazio - would be

included in the structure.

($1 = 0.8536 euros)