Teledesic's McCaw to bail out ICO

Paves way for merger

Troubled satellite mobile phone service ICO Global Communications yesterday received a major financial shot in the arm, according to the Wall Street Journal. The investment, which could reach $1.2 billion, will come from Craig McCaw, one of the key investors in Teledesic, the satellite-based broadband networking company ICO now plans to emulate. And given McCaw's connection with Teledesic, we'd be very surprised if the two companies don't pool their interests real soon now. Launched in 1995, ICO was formed to develop and a global mobile phone service along the lines of Iridium. Like Iridium, ICO was declared bankrupt this summer. However, unlike its rival, ICO has in where it goes forward now it's clear demand for satellite telephony isn't quite as high as predicted. ICO's plan is to convert its satellites -- currently being assembled by Hughes -- into broadband network carriers, which is pretty much what Teledesic is out to do. McCaw's investment should allow ICO to reach the total of $4.7 billion it reckons it needs to get its business up and running. Cash injections from various institutional investors already total well over $3 billion. The WSJ noted that McCaw is expected to take control of ICO by taking a position on the company's board. McCaw is, of course, Teledesic's chairman and CEO, so it's not hard to imagine that if the guy's doing the same job at two companies that are also doing the same job, he may well come to the conclusion that he may as well merge them into a single operation. McCaw is also considering an investment in Iridium, and if that is provided on the same terms as the ICO stake, it's entirely plausible that Iridium could be subsumed into Teledesic too. It's clear from the example of both Iridium and ICO that the cost of establishing, maintaining and satellite communications systems isn't something that individual companies can easily handle, and that some sort of consolidation has to take place. Teledesic's advantage here is that it's seen what the other guys got wrong and can plan accordingly. ®

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