LONDON-Amid the flickering satellite communications business, Craig McCaw’s ICO-Teledesic Global Ltd. appears to be shining bright after receiving more than $1 billion in investor financing led by McCaw’s Eagle River Investments L.L.C., Clayton Dubilier & Rice Inc. and Microsoft Corp. Chairman Bill Gates’ Cascade Investment L.L.C.
“We’re honored and humbled to have such sophisticated international investors as part of our team,” McCaw said.
The announcement comes at a time when the satellite communications community is filled with the well-chronicled woes of Iridium L.L.C., the bankruptcy filing by ICO Global Communications Ltd. and the impending threat of financial troubles of Globalstar Telecommunications L.P.
“There is a lot of money out there,” said Mike Guertin, telecom analyst for TeleChoice. “McCaw’s name has the cache of success. He is one of the pioneers in the wireless communications industry, and people seem to have faith in him.”
Eagle River led the latest investment round, contributing $500 million as part of McCaw’s previously announced $1.2 billion financial restructuring of New ICO. Those funds were used to help secure a controlling interest in New ICO, formerly ICO Global Communications, which emerged from Chapter 11 bankruptcy in May.
CD&R said it would invest up to $350 million in the venture, with $150 million committed initially followed by an optional $200 million at a later date.
“We look for opportunities to apply our operating skills to build strong businesses and our investment in ICO-Teledesic Global fits that strategy,” said Donald Gogel, chief executive of CD&R. “We believe its focus on high-speed wireless data and emerging new applications positions the company for success.”
Gates committed $100 million through his Cascade Investment vehicle, and along with McCaw, was one of Teledesic’s two primary founding investors in 1994.
“It’s a good start. They can leverage that investment to attract additional money,” said Elliot Hamilton, senior vice president and director of broadband services at The Strategis Group. “But there is still a long way for them to go. If setting up a satellite service was a 10-step program, this puts them at about step one.”
ICO-Teledesic Global is in the process of forming from the proposed merger of McCaw’s Washington-based Teledesic and London-based New ICO, with plans to be a global provider of wireless Internet satellite communications services, including Internet Protocol-based mobile and fixed broadband services.
“Broadband is a wild card,” Guertin noted. “Broadband data will probably be the only way for satellite communications companies to make money.”
New ICO plans to offer what it calls the satellite equivalent of third-generation wireless services, including wireless Internet and other packet-data services, beginning in 2003. Teledesic said it will deliver affordable broadband data and value-added services over a global network optimized for IP, with a target service date of late 2004.
