WSJ. Boeing Is in Talks for Controlling Stake In Ellipso Satellite Mobile-Phone Project
April 30, 1999
By JEFF COLE
Staff Reporter of THE WALL STREET JOURNAL
Boeing Co. is in serious talks on acquiring a controlling stake in the $2.4
billion Ellipso satellite mobile-phone project, according to executives
familiar with the discussions.
Lengthy meetings in the past week at Boeing's space and communication
unit in California focused on Boeing's cost to acquire a majority interest in
Mobile Communications Holdings Inc. The closely held Washington, D.C.,
company holds a Federal Communications Commission license to launch
the novel 17-satellite system. Executives said the talks could linger for
another month.
Some said the cost to Boeing could exceed $700 million, while others said
that price is too low to conclude a sale. Boeing made a $50 million equity
investment in Ellipso a year ago, when the Seattle aerospace company
agreed to be the prime contractor and integrator for the project.
A Boeing spokesman called the talks "exploratory." He said that Boeing
sees "potential" in Ellipso, but is studying "other investments" in the
space-communications realm. An MCHI spokesman said that the
company would "entertain" a broader Boeing investment.
The talks shed light on two key developments in the volatile market for
satellite-based systems for use -- anywhere phones and data
communications.
The talks mark Boeing's first known effort to own and operate a
satellite-services system. Boeing has struggled to profit from a boom in
commercial-jet deliveries. So it has been committing billions of dollars to
expand its presence in promising commercial-space markets. However,
Boeing officials have publicly insisted that they are focused on selling
hardware such as rockets and satellites.
For Ellipso's owners, including scientist David Castiel, MCHI's chief
executive, the talks betray the increasing difficulties of satellite-system
operators who need to raise large sums of development capital. To many
experts, those difficulties have been exacerbated by the technical and
financial problems experienced by Iridium LLC, the 66-satellite global
mobile-phone system already launched by a consortium including
Motorola Inc.
The comparatively low-cost Ellipso, one of just three global mobile-phone
systems that holds a license for U.S. operation, expects to begin service
late in 2001. It uses unusual oblong orbits to focus service on
underdeveloped countries.
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