October 28, 1999
ICO Survival Plan Hinges On Switch To
Data
By CECILE GUTSCHER
LONDON -- Satellite phone venture ICO Global Communications
Holdings Ltd. (ICOFQ) believes it has found a way out of bankruptcy:
transforming its proposed mobile phone network into a web of portable
Internet outlets.
The London-based company will unveil its new business plan next month,
including a proposal to spend up to $60 million modifying its satellites to
provide broad-band data services, like Internet access - rather than voice
and basic e-mail, according to analysts familiar with the plan.
"We're looking at ways to deliver faster data rates," ICO spokesman
Michael Johnson said. However, he denied that ICO is investing an
additional $60 million to upgrade its satellites.
ICO filed for bankruptcy in August after it defaulted on a $43 million
interest payment to bondholders. But it won a reprieve earlier this month,
when investors pledged new funding of $225 million, which the company
expects in the next few weeks. And that sum that could grow to $1.2
billion over the next several months, depending on how well the company's
new business plan is received by investors.
The company's shares stopped trading on Aug. 27 when Nasdaq
requested additional information from the company. The shares, which last
traded at 3 5/8, will remain halted until the company satisfies the
exchange's request for information.
With the modifications, analysts say the company is hoping to offer
"Internet Protocol," the standard technology to deliver Internet access. For
this sort of upgrade, ICO will likely have to multiply the data channels from
its current rate of 9.6 kilobits per second to a rate of 64 kilobits per
second.
Armand Musey, an analyst with Banc of America Securities, said the
upgrade gives ICO some hope for survival. "It improves their odds,"
Musey said. "It opens up a whole new source of revenue and broadens
their market potential a bit."
Still A Take-Over Target
Among European banks with a stake in the company's future is Credit
Suisse First Boston Corp. (Z.CSF), who advised "a number" of its clients
to invest in ICO, according to Johnson. A CSFB spokeswoman in London
referred calls to the bank's New York office; officials there weren't
available for comment.
CSFB helped lead manage ICO's $120 million initial public offering in July
1998, along with Donaldson Lukfin & Jenrette and Salomon Smith Barney.
At that time, ICO had already raised $3.1 billion from its core investors, a
consortium of telecommunications companies, and needed to raise $1.6
billion more for a total of $4.7 billion.
Now ICO says it only needs to raise $4.3 billion, as it expects to cut costs
through some belt-tightening measures. Johnson wouldn't elaborate on
what these are.
Though the fresh funding won ICO some breathing room, the company
remains a potential take-over target.
At the top of the list of potential predators: Teledesic LLC, the U.S.
satellite group backed by billionaires Bill Gates and Craig McCaw.
Teledesic has ambitious plans to launch an "Internet in the sky" and has
said it's eying the assets of ICO and its bankrupt brethren, Iridium World
Communications Ltd. (IRIQE).
Conceived by a group of 60 technology companies and set up in 1995,
ICO predates the revolution that has seen data unexpectedly outstrip voice
as a revenue source for many companies. According to the company's July
1998 prospectus to offer 10 million shares, ICO's business plan was to
"offer competitively-priced high quality mobile voice telephony, data,
facsimile, messaging and other services to customers anywhere in the
world."
The company's aim is to create a web of satellites that could carry
mobile-telephone calls from any location in the world. But the service won't
come cheap: ICO plans to charge an average of $1,000 per handset and
levy an average fee for calls of $2 a minute.
ICO's proposed global network is based around 10 to 12 satellites, which
would orbit at a distance of around 6,450 miles from earth. This contrasts
with the approach of its competitors, who have launched satellites in
low-earth orbit with shorter life spans.
Hughes Electronics Corp., the General Motors Corp. (GM) unit, is
building the satellites for the proposed global network and is a major
investor in the project. Hughes is said to have a risk exposure of about
$500 million through its contracts with ICO. Hughes also has already
directly invested about $94 million in the project for about a 4% minority
ownership stake. A Hughes spokesman referred all comments on the
modifications to ICO.
-By Cecile Gutscher;Dow Jones Newswires;44 171 842 9488 |
