Just weeks after a bankruptcy court approved the first part of his plan to bail out the financially struggling ICO Global Communications, Craig McCaw reportedly is close to completing a similar deal to save another bankrupt satellite-based global voice provider-Iridium L.L.C.
While officials at Iridium would not confirm the McCaw speculation, one source said to expect some kind of bankruptcy-related announcement before Christmas.
The speculation began over an update sent by Tim O’Neil, financial analyst at SoundView Technology Group Inc. He said such a deal, if structured like the ICO package, would give McCaw a controlling interest in Iridium, as well as ICO. This would allow McCaw to pick from the best aspects of the two systems, at a fraction of their respective construction costs. He also would gain Iridium’s worldwide recognition, almost 300 distribution agreements, roaming agreements, licenses and service authorizations and a global billing platform with currency-conversion capabilities.
In addition, Motorola Inc. could get back a significant portion of the $1.5 billion it has invested in Iridium to date, not to mention ongoing maintenance costs, he said.
The loser, he continued, would be Globalstar, which recently began the soft launch of its satellite-based global voice network.
“This would not be encouraging for Globalstar,” O’Neil commented. “Globalstar, still a regional system, would now have an immediate, potentially lower-cost competitor, ready to roll out third-generation handsets with actual worldwide coverage.”
Iridium declared bankruptcy earlier this summer after defaulting on its bank loans. Having launched service last November, the company could not attract the number of subscribers needed to continue operating the system. ICO entered bankruptcy shortly afterward without launching a satellite in its constellation.
McCaw has been watched closely since he announced late September plans to pursue early-market entry strategies for his Teledesic L.L.C. “Internet in the Sky” venture as provided by the bankruptcies of ICO and Iridium.
While the Teledesic network would not be compatible with either Iridium or ICO networks, controlling separate satellite networks would give him the ability to offer bundled satellite services.
McCaw offered ICO a $1.2 billion financing package, to be paid in three tranches. The bankruptcy court approved the first $150 million of the first tranche last month. However, Indian media baron Subhash Chandra has offered a competing bid for the remaining $350 million, as well as for the second and third tranches. A bankruptcy court heard both offers Friday, but the results were not available by RCR press time.
