ICO Reports First Quarter 1999 Results; Programme Progressing for Start of Service in Third Quarter 2000
LONDON--(BUSINESS WIRE)--April 21, 1999--ICO Global Communications, the global mobile communications company, reported financial results for the first quarter ended 31 March 1999 and updated its progress toward the start of its global mobile satellite communications system next year.
As a development-stage company with no significant operating revenues expected until the end of 2000, ICO reported a net loss of $(23.8) million or $(0.11) loss per ordinary share for the first quarter 1999, compared with a net loss of $(35.9) million or $(0.19) loss per ordinary share for the first quarter 1998. The first quarter 1998 included one-time costs associated with a proposed financing and the termination of a contract, which if excluded, would have resulted in a net loss for the first quarter 1998 of $(10.4) million or $(0.05) loss per ordinary share. Excluding these one-time costs, the higher expenses and net loss in the first quarter 1999, compared to the prior year's first quarter, were in support of the company developing its global mobile satellite telecommunications system and ground network. The details of the results are shown in the accompanying table.
The company continued to invest in the construction of its constellation of 10 medium Earth orbit satellites (plus two in-orbit spares), 12 satellite access nodes, two satellite control centres, connecting ground network and two network control centres, and business operations support systems. Capital expenditures were $192 million during the quarter and the cumulative capital expenditures since inception stood at $2.2 billion as of 31 March 1999.
Mr. Olof Lundberg, ICO's Chairman and Chief Executive Officer, said, "Third party estimates indicate that the total demand for mobile satellite services will be between 30 and 40 million subscribers worldwide. Based on our own recent primary and secondary market research, we believe that the total number of mobile satellite services end users by 2005 will be at least as high as these third party estimates. We also believe that ICO will be the global mobile satellite services provider best positioned from a cost and technological perspective to target all major segments of the mobile satellite services market."
Mr. Olof Lundberg said, "We are making good advances toward the start of our global mobile satellite telephone services next year. Three of our satellites are in an advanced stage of their system level integration and test. Two additional satellites are in their system level integration and test phase. Hughes is in the process of constructing our remaining seven satellites."
Mr. Lundberg continued, "Our first satellite is scheduled for launch aboard a Proton rocket from Baikonur, Kazakhstan, in June or July. We have scheduled four additional launches during the third and fourth quarters of this year. Our remaining seven satellites are scheduled for launch in 2000. We expect to begin offering our global mobile satellite telecommunications services in the third quarter of next year."
Mr. Lundberg added, "Before year end, we expect to test voice calls through satellites. Those tests will validate the design and operation of our key communications components we have proven in our ground and aircraft tests. In addition, the construction and installation of our satellite access nodes, control centres, and business system are all proceeding according to plan."
Mr. Lundberg said, "We also have achieved a significant milestone in our ground segment. We have connected the switch in our satellite access node in Germany with the public telephone network and have successfully passed telephone traffic with it, so we have validated that our network switching subsystems for interconnection will work as planned. Similar switching connections are underway at two additional satellite access nodes and planned at the remaining nodes."
During the first quarter, ICO added two manufacturers for maritime fixed terminals, JRC and Furuno. Manufacturers of ICO's handheld telephones will include Hughes Network Systems, Mitsubishi, NEC, Panasonic, and Samsung. Nera will manufacture boat kits and ruggedized marine handsets. Satellite payphones will be manufactured by Landis & Gyr. A number of other specialised and handheld terminal contracts are under negotiation. Operating prototypes for many of ICO's handsets and user terminals will be delivered to ICO this year, and production units will be delivered in quantity to service partners and service providers next year.
Wavecom has completed development of the ICO engine technology (an electronic module that contains most of the essential functions of an ICO phone) and is testing a preliminary model of an ICO phone, including the chipset and radio frequency circuits. Recently, ICO entered into a contract with De La Rue for ICO subscriber identification module cards and a contract with The Technology Partnership for ICO phone software.
"Distribution of ICO's services remains vital to our success," said Mr. Lundberg. "Our strategic investors (telecommunications and technology companies around the world) have formally expressed interest in distributing our products and services in 186 markets. We believe those markets represent substantially all of the estimated potential global mobile satellite services markets in the world. During the quarter we advanced our distribution commitments by signing four additional pre-launch agreements, bringing the total to 23. Since the end of the quarter, four more have been added. The pre-launch agreements precede the final distribution agreements. We expect to progressively roll-out the marketing of our satellite services starting in the third quarter next year and ultimately to distribute our services in all 186 markets."
Mr. Lundberg said, "We continued to extend our first commercial service, ICOroam(TM), during the quarter, achieving sales of $ 468,000. Today, five telecommunications companies - KPN of the Netherlands, Cellnet of the UK, Pacific Cellular of Taiwan, TMN of Portugal, and Eircell of Ireland - are offering our international inter-protocol roaming service."
ICOroam(TM) allows GSM cellular users to access the popular cellular standard (ANSI-41 - AMPS) in the United States. Before travelling, an ICOroam(TM) subscriber receives an AMPS-capable handset - either by renting or buying it. All calls to the subscriber's home cellular number are automatically routed through public and cellular networks to the handset. The airtime charges appear as part of the subscriber's billing from his home cellular network operator. Mr. Lundberg said, " I am especially pleased to welcome Richard Greco, who will join ICO as chief executive officer on 17 May. He brings 20 years of senior management experience in international telecommunications, including his most recent record in establishing a successful satellite-based business from scratch. His strong operational and cost-management skills combined with his experience in launching innovative and differentiated products will be particularly relevant to ICO's future."
Mr. Greco will be responsible for the company's day-to-day operational management and execution of the company's business plan. Mr. Lundberg will continue to serve as ICO's executive chairman and provide strategic leadership and vision, manage the relationship with the Board of Directors, and lead relations with the company's stakeholders.
On 7 April, ICO announced a rights offering in which ICO shareholders may purchase one additional ICO ordinary share at $5 per share for each ICO ordinary share they own on the record date. ICO shareholders may also oversubscribe for additional shares, which will be subject to availability. Subject to the review by the U.S. Securities and Exchange Commission, the rights offering is expected to begin in early May and to be completed before the end of May. All registered ICO shareholders will receive a copy of ICO's prospectus and related materials by mail soon after the registration with the S.E.C. becomes effective. The minimum gross proceeds required for the offering to be completed is $500 million. Proceeds from the offering will be used principally to continue funding the creation of ICO's satellite, ground, and distribution network for global mobile satellite telecommunications. The rights offering will be made only by means of a prospectus.
Mr. Lundberg concluded, "In summary, the ICO system is developing on plan. We expect to offer the best combination of high-quality services, wide choice of handsets, and excellent customer care, all at competitive prices."
Certain of the matters discussed in this news release are forward-looking statements that involve risks and uncertainties, including, without limitation, technical, regulatory, operating, competitive and market risks, risks relating to ICO being a development-stage company, and other risks and uncertainties. These are detailed in ICO's documents filed with the U.S. Securities and Exchange Commission.
ICO Conference Call on 22 April 1999
ICO's conference call covering the first quarter results will feature Mr. Olof Lundberg, Chairman and Chief Executive Officer, and Mr. Melvin Pointer, Acting Chief Financial Officer. The call will be hosted by Tom Myers, Vice President, Investor Relations, and Michael Johnson, Global Media Director. The conference call will begin at 9:00 a.m. (U.S. Eastern), 1400 hours (London), and 1500 hours (western Europe) on Thursday, 22 April 1999.
The call is open to analysts, portfolio managers, investors, and media.
The dial-in number to call is +1.719.457.2634. A recording of the conference call will be available through 29 April by calling +1.719.457.0820. The access code is 671112.
Editors' Notes:
ICO Global Communications (NASDAQ: ICOGF) was established in January 1995 as a private company to provide global mobile personal communications services by satellite, including digital voice, data, fax and messaging services. It has raised about $3 billion to date from equity and debt investors. Among its investors are more than 60 strategic partners and investors, comprising telecommunications and technology companies from more than 50 markets around the world. In July of 1998, ICO was listed on NASDAQ in New York and became a public company.
ICO expects to begin mobile satellite services operations in the year 2000. Its satellite services are expected to be used by international and domestic cellular users who roam outside areas covered by compatible cellular networks from business, industry and government organisations, mining, transportation, aeronautical, maritime, media and other sectors, as well as residents of rural and remote areas lacking adequate local communications.
ICO's services will be based on a new generation of pocket-sized mobile phones that will allow users to make and receive calls at any time, anywhere in the world. The handsets will be dual mode, capable of working on satellite, cellular and PCS networks. Using their handsets, customers will be able to roam between ICO and mobile networks around the world. If no cellular network is available, the handset will roam to ICO's satellite network to offer customers unrestricted mobility and accessibility for their communications needs.
Affordable services will be available to a wide range of users from people living and working in remote rural areas to the international business traveller. In addition ICO will offer services to the road transport, maritime and aeronautical sectors.
ICO Global Communications (Holdings) Limited
(a development-stage company)
Unaudited
Consolidated Statements of Loss
(Dollars in thousands
except per share information) Three months ended 31 March
1999 1998
Revenues $ 468 $ -
Direct production costs (859) -
Operating expenses (32,514) (44,312)
Depreciation and amortisation (1,679) (1,137)
Interest income, net 11,810 10,224
Taxation (1,072) (651)
-------- ----------
Net loss $ (23,846) $ (35,876)
======= ========
Basic and diluted net loss per share $ (0.11) $ (0.19)
Weighted average number of shares
used in computing basic and diluted
net loss per share 207,647,174 193,017,513
ICO Global Communications (Holdings) Limited
(a development-stage company)
Unaudited
Summary Consolidated Statements
of Cash Flows
(Dollars in thousands) Three months ended 31 March
1999 1998
Cash flows used in operating activities
Net loss $ (23,846) $ (35,876)
Non-cash items
Depreciation 1,679 1,137
Amortisation of debt issue costs 659 -
Exchange gain (3,970) -
Changes in working capital (80,182) 3,702
---------- ----------
Net cash used in operating activities (105,660) (31,037)
--------- ---------
Cash flows used in investing activities
Capital expenditures (191,799) (193,966)
Cash released in respect to
letters of credit 5,367 --
Sale of marketable securities 173,565 --
-------- --------------
Net cash used in investing
activities (12,867) (193,966)
--------- --------
Cash flows generated from
financing activities
Proceeds from issue of
Ordinary shares -- 112,130
Proceeds received in advance
on rights issue -- 124,600
Proceeds from issue of high
yield debt and
operator financing 11,485 -
Net cash generated from
financing activities 11,485 236,730
Effect of exchange rate
movements (78) 393
----------- -----------
Net increase (decrease) in cash
and cash equivalents $ (107,120) $ 12,120
========= =========
ICO Global Communications (Holdings) Limited
(a development-stage company)
Unaudited
Summary Consolidated Balance Sheets
(Dollars in thousands) As of As of
31 March 1999 31 December 1998
ASSETS
Current assets
Cash, cash equivalents
and marketable securities $ 496,012 $ 776,697
Other current assets 14,749 11,253
----------- -----------
510,761 787,950
Tangible fixed assets
Property and equipment in
service, net 13,256 11,543
Property under construction 2,146,187 1,807,025
--------- ---------
2,159,443 1,818,568
Other non-current assets
Restricted cash and advance deposits 91,304 57,466
----------- -----------
Total assets $ 2,761,508 $ 2,663,984
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 274,690 $ 162,795
Long-term debt 544,215 533,021
Other non-current liabilities 3,463 4,409
Shareholders' equity 1,939,140 1,963,759
--------- ---------
Total liabilities and shareholders'
equity $ 2,761,508 $ 2,663,984
========= =========
CONTACT:Media contact
Michael Johnson
ICO Global Communications
Tel: +44 181 600 1255
Fax: +44 181 563 0301
Email: michael.johnson@ico.com
or
Investor contact
Tom Myers
ICO Global Communications
Tel: +44.181.600.0604
Fax: +44.181.741.0856
Email: tom.myers@ico.com
Visit the ICO Website at http: www.ico.com
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