**McCaw wants G*? NYTimes. Cellular Pioneer Weighs Taking Big Stake in Iridium. Move Would Aid Satellite Phone Venture
October 5, 1999
By DAVID BARBOZA
HICAGO -- Craig O. McCaw, the cellular telephone pioneer, is
considering taking a large stake in Iridium L.L.C., the troubled
satellite telephone venture that filed for Chapter 11 bankruptcy in August,
according to people close to the negotiations.
Any investment by McCaw would be a huge
boon to Iridium and come as part of a larger
bankruptcy reorganization plan meant to raise
hundreds of millions of dollars to salvage a $5
billion global satellite network that got off to a
disastrous start earlier this year, people close to
the company said.
Although the talks are in the early stages, people
close to the negotiations said McCaw is
interested in investing in Iridium or a number of
other satellite companies to help prove that the
satellite communications business is viable.
The move, which is not expected in the coming weeks, could also be
valuable in setting the stage for Teledesic L.L.C., an even more ambitious
"Internet in the Sky" system that McCaw is helping develop with the
backing of William H. Gates of Microsoft, Motorola Inc. and the Boeing
Company.
It is unclear whether Iridium, which continues to operate with a small
subscriber base, would play any role in helping develop Teledesic.
Iridium is a satellite telephone service devoted primarily to voice
operations. And Teledesic, which is scheduled to begin in 2004, is
supposed to use much larger satellites and a different technology to
deliver broad-band data and Internet access. But it is believed by some
analysts that by investing in Iridium or some other satellite venture,
McCaw was trying to find a way to gain earlier access to the satellite
business and learn valuable lessons about how it operates.
People close to the talks said that over the weekend Motorola, which
helped found Iridium and operates its system of 66 low-orbiting satellites,
told bank creditors that McCaw was considering taking a stake in
Iridium, which earlier last summer defaulted on a $1.5 billion loan.
The deal could relieve pressure on Motorola Inc., which backed $750
million in Iridium loans and said last summer that it would not invest any
more money in the venture without outside backers. Monday, a
spokesman at Motorola Inc. in Schaumburg, Ill., said the company
declined comment on the prospect of McCaw's investment.
Roger Nyhus, a spokesman at Teledesic L.L.C. in Bellevue, Wash.,
where McCaw is chairman and co-chief executive, said: "This is highly
speculative. We're at the early stages of exploring a variety of early
market options, but we have not committed to invest in any of them."
Michelle Lyle, a spokeswoman at Iridium L.L.C. in Washington, also
declined comment. "The restructuring is continuing," she said.
Still, people close to the talks say McCaw, who helped found Nextel
Communications Inc., sees an opportunity in a market that has been hit
hard by bankruptcies.
Last summer, Iridium L.L.C. and ICO Global Communications, another
satellite telephone venture, filed for bankruptcy protection within weeks
of each other, hurting prospects for the entire industry. Shares of the
companies plummeted. After spending more than $5 billion to develop its
technology, Iridium -- which had promised telephone communications
"with anyone, anytime, virtually anywhere in the world" -- lost 90 percent
of its stock market value just months after its service was started last
January.
"The satellite industry desperately needs a success," said one person
close to the negotiations with McCaw. "This move could prove to the
market that this is a viable sector."
Armand Musey, an analyst at Banc of America Securities, said that by
investing in Iridium, McCaw could also be protecting his own venture in
Teledesic, which is also teaming up with Motorola to develop and
operate advanced satellites.
"If Iridium fails, it could also poison the waters for Teledesic," Musey
said, though the two systems are very different. "So for Teledesic to have
a strong chance of getting financed, Iridium has to work in some manner."
One person close to McCaw, however, said that he was talking to a
number of satellite companies and that McCaw had no interest in
investing in any company that is not capable of returning a huge profit; he
is not interested in propping up Iridium or any other company simply to
lift spirits in the satellite industry.
Many analysts agree that Iridium was a marketing and financial failure,
not a technological failure, and that McCaw may simply be interested in
getting in at a good price and resurrecting a company that has a great
deal of potential.
Musey at BancAmerica, however, says that time may be running out.
Iridium has been in bankruptcy for nearly two months and its marketing
momentum could be running low.
Copyright 1999 The New York Times Company |
