Subject: [NEXTEL-1] Outlook for Ico unclear- Craigs Satellite Dreams May Come Crashing To Earth

From: [email-masked]
Date: Wed, 10 Sep 2003 00:49:52 -0400

Outlook for Ico unclear
Will McCaw 'birds' fly?
By Jeff Meisner
Puget Sound Business Journal (Seattle)

Sep. 8 — Craig McCaw's remaining satellite venture should have a new "bird" ready
for launch in 2005, but industry watchers remain skeptical the high-risk venture
will ever get off the ground.

Ico's plan is to combine satellites and earth-bound cellular towers to deliver
mobile voice, Internet access and high-speed data services such as global two-way
messaging to customers in remote areas.

The Boeing Co.'s El Segundo, Calif.-based satellite division this summer renewed
an 8-year-old contract to finish work on 10 Ico satellites, a project that has
been in limbo for the past five years.

Todd Wolfenbarger, an Ico spokesman, said renewing the deal with Boeing was
critical to Ico's efforts to put a second satellite into orbit by 2005.

Under Federal Communications Commission guidelines, Ico must launch a satellite by
2005 or risk losing its licenses for crucial radio frequencies. Without access to
that spectrum, Ico won't be able to operate its fledgling network.
Maintaining its spectrum rights isn't the only regulatory hurdle the company
faces. Ico is also awaiting FCC approval of its proposed merger with bankrupt
satellite communications provider GlobalStar LP of San Jose, Calif.

David Hoover, an analyst with The Precursor Group, a Washington, D.C.-based
research firm that tracks the telecommunications sector, said the contract renewal
with Boeing is an encouraging sign for McCaw's satellite play.
But he said the new agreement was driven not by a vast demand in the market for
satellite broadband services, but primarily by regulators.

His firm "has never been a big believer in satellite wireless communications,"
said Hoover. "It's an expensive, long-term prospect. We just don't see a market
for it."

Hoover said competition in the wireless sector has only gotten more fierce over
the last few years, with subscriber growth slowing and rate plan prices falling
through the floor.

"There's no dearth of wireless capacity out there already anyway," he said.
"There's already competition in the cities and rural areas. Then there's the 250
megahertz of unlicensed Wi-Fi spectrum for rural counties that'll be rolled out in
the next year or so."

For its part, Ico remains circumspect on the details of its strategy. Wolfenbarger
would only reiterate the company's long-held plans to target niche industries with
remote locations in need of wireless broadband services, such as oil rigs,
maritime fleets, government installations and transportation companies.

Don Carros, an analyst with The Meta Group Inc. of Stamford, Conn., said one of
Ico's proposed target markets -- transportation -- may be viable.

"Rail companies, taxi-cab fleets and trucking companies all might use this type of
service," Carros said.
Ico couldn't do it on its own, though. The company would have to partner with a
company such as OnStar Corp., a division of General Motors Corp. that offers
in-car mobile diagnostics, directional and communications services to drivers.
That would bring integration hurdles to the fore as well -- OnStar's network uses
a different radio frequency than Ico's satellite network, and making them
compatible so voice and data can flow seamlessly between the two won't be cheap or
easy, Carros said.

Despite its challenges, Ico has managed to make some moves in the market that have
piqued the interest of industry watchers.
In February, regulators granted Ico's request to set up terrestrial cellular
towers to increase the reliability and coverage of its network.

Obtaining the FCC's permission for those transmitters, heavily opposed by the
major wireless carriers who fear satellite competition, had been a top priority
for McCaw since he bailed Ico out of bankruptcy with $1.2 billion in financing in
late 1999.

Precursor's Hoover said the FCC decision could prove crucial to Ico if the company
ever launches its proposed service.
"That was good news for Ico," he said. "One of the big problems with satellite
handsets is they often don't work indoors or in urban canyons. McCaw has said on
the record a number of times that without the ability to set up bay stations on
terra firma, there's no way Ico's strategy would work."

But the real coup for Ico could prove to be its proposed acquisition of
GlobalStar.
In late April, the bankruptcy court approved Ico's $55 million bid for a 54
percent controlling interest in GlobalStar, which spent billions building its own
satellite infrastructure. The deal won't be complete until GlobalStar emerges from
bankruptcy and the FCC approves the transfer of its spectrum licenses to Ico.

Mac Jeffery, a spokesman for GlobalStar, said the company expects to come out of
Chapter 11 by the end of the year. In addition, the FCC could approve the
Ico-GlobalStar deal within a matter of weeks.

Wolfenbarger said Ico sees its bid for GlobalStar as an opportunity to acquire
much-needed network and customer assets at a low price. GlobalStar's assets could
prove useful to Ico and may make it easier for the company to break into the
market. GlobalStar already has 52 operating satellites in space and paying
customers, whereas Ico has only managed to launch one of its birds, 18 months ago,
Hoover said.

Filings with the Securities and Exchange Commission show 140-employee GlobalStar
is still bleeding cash. In the second quarter, the company lost $16.8 million on
$13.9 million in revenue, an 11 percent increase over losses in the prior quarter.
As of June 30, the company had about $18 million in cash on the books.

Ico hasn't revealed much in terms of its plans for the GlobalStar assets, to the
public or to GlobalStar itself.
"I don't know what Ico has in mind for GlobalStar," Jeffery said. "But we do have
indications that they're in this for the long-term. I don't think they're looking
for a quick flip or an asset sale."

Even if the transfer of GlobalStar's spectrum licenses is approved by the FCC, Ico
could face integration challenges with GlobalStar's network, which uses a
different radio frequency than Ico, Meta Group's Carros said.

Jeffery said it's not clear at this point whether Ico will try and integrate the
two networks or run them as separate entities.
All in all, Ico remains a big gamble for McCaw, Hoover said. McCaw has already
lost hundreds of millions of dollars in another ambitious satellite venture --
Teledesic LLC -- which discontinued operations and construction of its satellite
network last October.

At one time, McCaw had plans to merge Ico and Teledesic, but the telecom
depression made finding financing for the complicated deal difficult to find, and
it was called off in November 2001.

http://famulus.msnbc.com/famuluscom/bizjournal09-06-010434.asp?bizj=SEA#body

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