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To: djane who wrote (6447)	8/12/1999 3:49:00 PM
From: djane	Read Replies (1) \| Respond to of 29987

forbes. Satellite woes August 12, 1999 By Charles Dubow NEW YORK. 01:45 PM EDT?Going on the old theory that one bad apple spoils the bunch, the recent problems faced by mobile satellite telephony companies ICO (nasdaq: ICOGF) and Iridium (nasdaq: IRID) mean only more hard times ahead for the struggling satellite industry. "Right now the capital markets are very reluctant to get involved with any non TV-centric satellite company," says William Kidd of C.E. Unterberg Towbin, an investment bank in New York City. "This is a setback to all emerging satellite businesses. Not only will it be harder to raise money for mobile satellite telephony but for broadband as well." Kidd questions the wisdom of Hughes (nyse: GMH), a leading satellite developer and parent of satellite television provider DirecTV, to invest several hundred million dollars into ICO. An announcement in which Hughes formalized its commitment to ICO was supposed to be made today but that announcement has apparently been postponed for several weeks. ICO needs $600 million by the end of the year or it risks going dormant. Hughes already has a $94 million investment stake in the company and to increase its investment would raise that stake from 4% to approximately 12% to 15%. "A significant Hughes investment implies that in order to avoid owning up to charges Hughes is willing to back projects that virtually no other investor would," says Kidd. Typically, prime contractors such as Hughes provide seed money and then open investment up to the capital markets. "Hughes is already $500 million in the hole to ICO and haven?t been paid. They?re betting that if they pump in another $100 million everything will be all right. The scary thing is that it leaves them open to keep chasing the write-off and that $100 million could easily jump to $150 million." Iridium faces a different problem. Yesterday it announced that it was forced to default on $1.5 billion in loans, a sign that sounded to many like a death rattle. Once touted as the next big thing in global communications, for most of the year the company, a consortium led by Motorola (nyse: MOT), has been skidding down hill faster than a hog on skis. ICO is not in as bad a shape as Iridium--not yet anyway. The problems that both companies are facing are related. The cost of putting satellites in space has not been offset by the number of mobile telephony subscribers both needed to get into the black. Both have consistently missed their subscriber numbers and their problems have succeeded in scaring off potential business. "ICO has nothing to fix," says Kidd. "They just need money. They have a similar business model but a radically different operating strategy from Iridium. They have fewer satellites but they send them up higher. These satellites also have more capacity than Iridium?s, so, if they can build up critical mass, they can offer much lower per minute calling charges." At the moment, satellite broadband is available through VSAT (Very Small Aperture Terminal) satellites, which are effective but much too expensive for the consumer market. With the increased rollout of broadband technology via, either cable or DSL (Digital Subscriber Line), the two other potential access avenues are wireless and satellite. Of these two, two-way satellite is the furthest away from being deployed in a meaningful way. "This is going to delay the development of second-generation satellite technology even longer," says Kidd. ?¸ 1999 Forbes.com