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December 1999 - latest Teledesic connection with Craig McCaw - ICO Global Communications & Iridium

What does Craig McCaw know - or think he knows - that no one else does? The question hangs in the air as our neighbor billionaire begins investing as much as $1 billion to rescue the ICO Global Commucations Ltd. satellite-phone system, now in bankruptcy court. McCaw is buying into the satellite-phone arena just as everyone else is bailing out of satellite deals. The bankruptcy-court filigs of ICO and competitor Iridium LLC have convinced investors that satellite-communications projects are too expensive, take too long and have too small a market to.make money. The "Iridium flu" is cripplirig fund-raising at other satellite projects, such as McCaw's planned $10 billion Teledesic LL "Internet in the sky." Teledesic, which cell phone pioneer McCaw co-founded with Microsoft Chaiman Bill Gates, is based in Bellevue. McCaw has built empires, and fortunes, where others fear to tread. In the 1980s, he assem-bled local cellular-phone franchises into a national network, which he sold to AT&T Corp. in 1994 for $11.5 billion. In 1995, he took control of Nextel Communications Inc., whose cell phones double as two-way radios. Since then, Nextel's stock has risen more than sixfold, giving McCaw a stake valued at more than $6 billion. That record inspires a lot of faith. Craig McCaw has a history' of seeing thingbefore others do. The smart money says he knows something and he sees something no one else sees. Just what that is, only McCaw knows. And he's not talking.

McCaw won very favorable financial term because of ICO's dire straights .

For the $1.2 billion that he's promised to invest or raise, McCaw will take as much as a 75 percent stake in ICO. That gives him a much better chance of recouping his investment than ICO's original investors, who expected to raise $4 .7 billion, or the backers of the 5 billion Iridium project. Moreover, McCaw can invest as little as $370 million and still take operational control of ICO,.

McCaw believes more than ever in a wireless future. And, despite the troubles of ICO and Washington-based Iridium, he still believes that space will play a vital role. The scope of McCaw's recent investments is breathtaking - all the more so for a man who in 1995 said he "likes to focus on one or two things at a time."

Besides ICO and Teledesic, he is the largest shareholder in NexteL which has offered, to pay $6 billion for additional cellular- phone. frequencies now held. by bankrupt NextWave Personal Communications Inc. McCaw's Bellevue-based NextLink Com- munications Inc. is the largest holder of licenses for local wireless systems that can connect users to the Internet and is building a national fiber-optic network.

I think he's building the telecommunications empire of the next century. He continually obtains spectrumand licenses that appear to be of low value at the time and then they magically appreciate.

These days, the bargains are in the satellite aisle. Iridium had hoped to attract 50,000 new users per month. Instead, the expensive, often unreliable service had roughly 20,000 users when it filed for protection from creditors Aug. 13. ICO, unable to raise money for its plaimed 2001 launch, followed two weeks later.

That created an opening for McCaw, whose satellite interests had been focused on Teledesic and lightning-fast Internet con- nections. But Teledesic won't get off the ground before 2004, and McCaw was itching to get into the game sooner. ICO was an opportunity brought to him by fmancial markets. McCaw began talks with ICO in late September and moved quickly. By Oct. 8, he had submitted a reorganization plan . He examined the ICO satellites in the Los Angeles plant of Hughes Electronics Corp., where they are being built. On Oct. 30, ICO's board chose McCaw's plan over three other proposas including one from Indian entrepreneur Subhash Chandra, who continues to seek control of ICO. Courts in the U.S., Bermuda and the Cayman Islands approved the first stage of McCaw's deal last week, narrowly averting ICO's liquidation. ICO has headquarters in London and Washingto, D.C. McCaw doesn't appear to be planning major changes in ICO, which will offer phone calls and relatively slow data transmissions. Officials say ICO still plans to launch the first of its 12 satellites early next year. But the design of the system makes it relatively easy to change some features, such as modestly increasing the data-transmission speed, from the ground.

ICO says it will avoid Iridium's problems by targeting different markets, such as ships and remote industrial sites like mines and oil wells, rather than global business travelers. The company also expects to offer cheaper per-minute rates and more versatile phones that will work with terrestrial cellular networks.

ICO could run into trouble if it turns out that the market for satellite-based mobile telephone service is big enough for only one company. It will have to compete with both Iridium and Globalstar, which recently began testing its service. ICO doesn't expect to begin service until mid-2001. The ICO investment confounded observers who expected McCaw to invest in Iridium because of his longstanding ties to Motorola Corp., which is also a $300 million equal co-investor with Mccaw in Telledesic. Motorola is the prime contractor and largest investor in Iridium, as well as the prime contractor for Teledesic. But McCaw saw advantages in ICO, such as the data-transnmission ability. He'll also have more opportunity to tinker because ICO's satellites are still on the ground. Once they're launched, ICO's satellites are expected to last 10 to 12 years, compared with the five or six years expected remaining on Iridium.

Still, McCaw has not ruled out investing in Iridium as well. That would allow him to begin offering satellite-communications services today, rather than waiting another 18 months. And that may offer a clue to the future of Teledesic, about which. McCaw has been strangely ely silent m recent months. Associates insist Teledesic remains on track, but an expected three-month review of the system with Motorola is approaching five months, with little comment from either side. Teledesic is recuritng for a comptorller with "10K and SEC experience which hints that an IPO may be in Teledesic's near future. In many ways Teledesic, ICO and Iridium are really all in the same business and a merger or consolidation would eliminate the connection between invetsor mistakes and the validity of the business concept and rebuild investor confidence in satellite projects in time for the Teledesic IPO.

Latest Developments At Teledesic October 1999

Russian Space Vehicle Manufacturers & Commercial Launch Services

VIEWNET - Exporting "Minds" without physical transport of people the global labor market


The purchase of more than 102 satellite launches with ultimate launch of 840 satellites will be the largest transaction to take place between a U.S. company and a Russian company in this coming decade.

Teledesic, backed by billionairs Craig McCaw and Bill Gates, plans to launch a network of 840 low-earth-orbit satellites that would provide wideband telecommunicaitons to any point on earch. The company expects to begin launching satellites by 1999 and to start service in 2002. Several hundred thousand kilograms of material will b eput up in space.

On April 29th 1997, The Boeing Company invested $100 million yesterday with Bill Gates and Craig McCaw's plan to blanket the globe with communications satellites, by purchasing a 10% stake in Teledesic.

Apparently Boeing will be the prime contractor to place 840 satellites in low-earth orbit at an estimated cost of $9 billion or about $10,714,285 per satellite.

This system will be capable of high speed data transmission 60 times faster than today's fastest modems.

Some talks have taken place with The International Corporation for Space Transport Systems a coalition of the Russian Space Agency, The Ukraine national Space Agency, several engineering and scientific research organizations and former Soviet missile manufacturers. The launch discussions contemplate using converted Soviet SS-18 intercontinental ballistic missiles, originally designed to carry nuclear warheads.

Microsoft, Teledesic and Palms & Company are all located on Lake Washington in Kirkland (Seattle), within one mile of each other. (see photo of facilities on my web pages)

Latest Developments

In 1999 Motorola invested $300 million for a 10% interest and has also become the prime contractor for Teledesic's planned network.

Another recent investor of $300 million is Saudi Arabia's Prince Alwaleed Bin Talal

We recommend our clients consider an equity position in the IPO of this company.

Teledesic should be able to avoid the mistakes that caused Iridium LLC and ICO Global Communications Services Inc. to file bankruptcy protection in August. Although Teledesic does plan to use satellites, the capacity of Teledesic is very different. Iridium and ICO Global offered voice telephone. Telesdesic plans to deliver two way highbandwidth data and Internet services over its network of 288 low-orbiting satellites, the satellite equivalent of fiber optic access. Customer will be large companies, governments, organizaitons and institutions rather than individuals. In essence it will be a global area network which will enable organizations to seamlessly connect all branch offices, employees, suppliers and customers, a capacity which doesn't exist today. Service will also be provided to areas of the world where there is no wired broadband - or any other communication service at present. Iridium builthe worng handsets, delivered them late, targetdd the wrong users and priced incorrectly. Unlike its competitotrs Teledesic has access to almost unlimited caital including Crain Mccaw, Microsoft's Bill Gates, Arab Princes, Motorola etc. These backers are strong enough that they can do anything they choose to do. They have no difficulty raising money. I continue to recommend the company.


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