British satellite network OneWeb is the only operational rival to Elon Musk’s Starlink network - Vostochny Space Centre/Shutterstock

A British taxpayer-backed rival to Elon Musk’s Starlink faces a looming cash crunch as Donald Trump’s administration tears up foreign defence contracts.

Eutelsat, a Paris-listed satellite business which counts Britain as a major shareholder, said the US government had refused to renew a “sizeable contract” amid Mr Musk’s drive to cut federal spending.

It warned of a hit to sales following efforts by American officials to “cut government spending overall” under pressure from the Department of Government Efficiency (Doge) led by the billionaire Tesla boss.

The French business owns OneWeb, the British satellite network that is the only operational rival to Mr Musk’s Starlink network of thousands of communications satellites. The UK holds a 10pc stake and a golden share in the company.

The business reported a 2pc drop in like-for-like sales as it told investors fewer than half of its US government contracts that were up for renewal had resulted in new deals.Eutelsat warned of a hit to sales following efforts to cut spending by Elon Musk’s Doge - Ali Haider/Shutterstock

The drop “reflects the change in the new presidential administration’s geographic prioritisation for the defence department”, Eutelsat said.

Joanna Darlington, Eutelsat’s head of investor relations, said the company’s defence renewals were “far lower” than they used to be, and the cuts had coincided with “when Doge was at full speed”.

Eutelsat ‘needs €4bn to develop satellites’

Overall government sales climbed 10pc in the quarter, but this was driven by deals outside of the US.

Eutelsat pointed to deals in Taiwan and Europe, which Ms Darlington said “don’t want to be reliant on a US operator”.

The news comes as Eutelsat scrambles to raise additional cash to shore up its balance sheet and provide funding to help build a €10bn (£8.4bn) satellite network for the EU. The network is intended to break the bloc’s reliance on Starlink, which is part of the mercurial Mr Musk’s SpaceX empire.

Eutelsat is a key player in Iris 2, a network of spacecraft planned by Brussels. The business needs around €4bn to cover the costs of developing new satellites. It also needs to refinance around €1bn in debts by mid-2027.

The business has been in talks with government funding agencies to provide state-backed loans, but Christophe Gaudiere, its finance chief, admitted this was “not going to be sufficient” to cover its needs. He said it was in talks for the “reinforcement of our balance sheet structure”.

The Telegraph understands the French government has been in talks about injecting more capital into the business, which could boost its shareholding in the business and dilute the UK’s stake.

Separately, Eutelsat said it would suffer a €16m hit as it is forced to cut off a series of Russian TV channels that broadcast via its satellites. The decision comes after French regulators demanded it halt broadcasts of the channels, which were linked to sanctioned Russian businesses.

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