To all - WSJ article on ICO / Hughes satellite deal.
February 1, 2000
ICO Global Reworks Pact
To Buy 12 Hughes Satellites
By ANDY PASZTOR and NICOLE HARRIS
Staff Reporters of THE WALL STREET JOURNAL
ICO Global Communications Ltd., seeking to bounce out of bankruptcy
proceedings, has renegotiated an agreement to purchase 12 satellites from
Hughes Electronics Corp. on more-favorable terms and is close to securing
options on four more, according to industry officials.
The deal, which is still preliminary, could have a value of as much as $3 billion
if the options are exercised. It is expected to be announced shortly, barring
last-minute objections from the federal bankruptcy court in Wilmington, Del.
The long-term impact could help boost lagging investor confidence in a variety
of large satellite ventures. The latest move signals that both ICO and
cellular-phone pioneer Craig McCaw, who is heading a group of international
investors seeking to bring the company out of bankruptcy proceedings, are
committed to speedy deployment of a revamped project.
The new focus will be more on Internet and
other data-based services, rather than the original
emphasis on voice transmissions. The
bankruptcy court is expected to approve the
second phase of a $500 million cash infusion
from the investors within a few days, these officials said.
ICO had originally contracted to buy 12 Hughes satellites. The original
contract, including launch services, ground tracking equipment and other
hardware, amounted to nearly $2.5 billion. Some industry officials estimated
that Hughes is still owed $300 million or more from the initial pact, and may
have another $100 million of direct investment at risk in the trouble-plagued
project.
Bob Ratliffe, vice president of Mr. McCaw's Eagle River Investments LLC,
said he understood that ICO had reached agreement with Hughes for the four
additional satellites. He said that many of the modifications to accommodate
more and faster data transmissions can be done when the satellites are in orbit.
"We believe fundamentally that people are going to interface with the Internet
over mobile [telephone] handsets the way they interface with it on the desktop
today," Mr. Ratliffe said.
World-Wide Operator
ICO Global Communications aims to offer anytime, anywhere wireless
communications using satellites.
Headquarters: London and Washington, D.C.
CEO: Richard Greco, former president of Loral Orion, which provides
satellite-based corporate networking and Internet services
Intended market: Anyone needing mobile communications in areas
either not served or underserved by wireless networks: globe-trotting
business executives, mariners, truck drivers, relief-agency workers and
government users such as the military
Some backers/partners: Wireless pioneer Craig McCaw, General
Motors' Hughes Network Systems, Deutsche Telekom
A Hughes spokesman declined to comment, citing the court proceedings. At
ICO's London headquarters, a company spokesman said that "any negotiation
of vendor contracts has to remain confidential until concluded."
Some technical and scheduling details still need to be worked out, and no
formal agreement has been signed. But an announcement could come shortly
after ICO submits its plan of reorganization to the court at the end of this
week.
The options particularly remain under discussion, with some industry officials
calling them as-needed spares while others believe they eventually will be
converted to additional firm orders.
The first ICO launch, for which Hughes already has received authorization to
proceed with crucial fueling preparations, is slated for sometime in March,
industry officials said.
For Hughes, which is believed to have made some concessions on price and
other items, an agreement would revive a large chunk of business that seemed
in jeopardy barely a few months ago. Before the latest developments, the
satellite-manufacturing arm of the General Motors Corp. unit, based in El
Segundo, Calif., had projected delivering 20 satellites with a value of about $2.5
billion for all of 2000.
It isn't yet clear how many of ICO's satellites can be added to that production
schedule, or whether some of the satellites will be modified before launch to
conform to the revised project requirements.
The progress comes five months after the collapse of a Hughes-championed
package that failed to rescue ICO's project, which then had an overall price tag
of $4.7 billion.
Already, some analysts are predicting that a sizable new contract between ICO
and Hughes is likely to turn into a strong shot in the arm for an industry still
reeling from ICO's bankruptcy filing and the earlier, equally high-profile
financial meltdown of Iridium LLC, another satellite-phone venture.
"ICO looks like it's going to get up in the air," said Armand Musey, an analyst
with Banc of America Securities Inc. in New York. "It's certainly a real vote of
confidence for data and telephony via satellite from a very credible investor
outside the industry."
Meanwhile, Mr. McCaw is negotiating with Iridium creditors to gain control of
that troubled satellite project as well. "Craig is still interested in Iridium and
continues to explore those opportunities," according to Mr. Ratliffe.
-- Scott Thurm contributed to this article.
Copyright ¸ 2000 Dow Jones & Company, Inc. All Rights Reserved. |
