Eutelsat Communications SA and OneWeb Ltd are set to combine in an all-share deal valuing the UK satellite operator at $3.4 billion, a step toward creating a European champion to rival the likes of Elon Musk’s SpaceX.

OneWeb shareholders will hold 50 percent of Eutelsat, which will continue to be listed in Paris and will ask to be listed on the London Stock Exchange, the companies announced in a statement on Tuesday. The announcement confirms talks made official on Monday and first reported by Bloomberg last week.

The deal is the latest merger in what has become a race by corporations and governments to offer rapid connectivity via low-orbit satellites. Both the UK and French governments have stakes in OneWeb and Eutelsat respectively, and the UK will continue to own a special share, giving it certain veto rights over strategic decisions such as the location of the firm’s headquarters.

Although shareholders will split the company, the deal bears the hallmarks of a takeover by Eutelsat. OneWeb will keep its own branding and operate the low-orbit business of the combined group, which will have a primary listing in Paris.

Eutelsat chairman Dominique D’Hinnin is set to be chairman of the combined entity, with his OneWeb counterpart Sunil Bharti Mittal as co-chair and vice president. Eutelsat Chief Executive Officer Eva Berneke will run the new group.

The UK government has agreed a range of national security rights, and for OneWeb to prefer procurement for manufacturing from businesses in the UK, according to a statement from the UK government. Both the UK and France will have board representation.

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Founded in 2012, OneWeb collapsed in 2020 when lead investors pulled their money at the height of the coronavirus pandemic. The UK government put forward about $500 million as part of a $1 billion partnership with Bharti Global, in a deal pushed by Dominic Cummings, a former adviser to Prime Minster Boris Johnson, under the guise of protecting a potentially vital tech asset following Brexit.

The deal will give Eutelsat a “unique position” on the market and has the potential to generate 1.5 billion euros ($1.53 billion) in increased revenue as well as investments and cost synergies, the companies said.

Investor reaction to the deal was negative on Monday, with Eutelsat shares dropping 18 percent after announcing deal talks. Shares remained flat on Tuesday. Eutelsat will also suspend its dividend for two years after this year, to help pay for the next generation of OneWeb’s satellite launches.

The merger presents concerns around short-term cash burn and government contracts, Deutsche Bank analyst Roshan Ranjit said in a research note.

Eutelsat and OneWeb have also contrasting relationships with Russia.

OneWeb said in March that it will use SpaceX to launch satellites after Russia blocked deployments planned with French rocket company Arianespace SA.

Eutelsat has continued to provide select satellite services to Russia, even after pressure from European regulators. It reaches 50 percent of homes across the Russian and surrounding region, according to its website.

“Eutelsat has a policy of neutrality,” said Berneke on a call with reporters on Tuesday. “We comply with all sanctions. We reduced the number of channels we broadcast.”

Eutelsat, which originally agreed to pay $550 million in cash for a 24 percent stake in OneWeb in April 2020, operates satellites for clients like government and TV broadcasters from higher geostationary orbit. These spacecraft do offer the same quick connection speeds as those from low-orbit satellites.

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The new company will combine Eutelsat’s geostationary earth orbit satellites and OneWeb’s low orbit satellites. Berneke said Eutelsat’s “initial investment in OneWeb was underpinned by our strong belief that the future growth in connectivity will be driven by both GEO and LEO capacity.”

OneWeb shareholders would receive 230 million newly issued Eutelsat shares representing 50 percent of the enlarged share capital. The combined entity is set to have a 1.2 billion euros revenue and 0.7 billion euros EBITDA for fiscal 2022-2023. On Tuesday, Eutelsat published results showing 1.15 billion euros full year revenue, declining by 6.7 percent, in line with estimates.