ICO Global Communications, the troubled London-based mobile satellite startup, appears poised to jumpstart its delayed service launch by agreeing to pay $55 million to buy a controlling interest in the assets of bankrupt rival Globalstar.
ICO has fulfilled all the milestone requirements of the Federal Communications Commission to keep its licenses and now has positioned itself to gain an existing customer base by buying San Jose, Calif.-based Globalstar. ICO, owned by an investor team led by telecommunications pioneer Craig McCaw, received approval from U.S. Bankruptcy Court in Delaware to become majority owner of a reorganized Globalstar.
ICO’s $55 million investment would give it a 54 percent equity stake in the new Globalstar. The court-approved sale supercedes an offer for Globalstar made by Thermo Capital Partners in April. ICO’s investment in Globalstar is a mere fraction of the $12 billion that was spent to develop mobile satellite communications and handheld devices. Globalstar, an earlier version of ICO and the original Iridium were the three leading mobile phone service startups in the late 1990s – all of them ended up in bankruptcy court.
“The numerous bankruptcies throughout the industry have been indicative of the risks associated with providing innovative new services and the failure, to date, of mobile satellite service (MSS),” said McCaw, ICO’s chairman. “We believe that the $4 billion spent thus far on Globalstar, however, will result in useful services for governments, corporations and communities around the world. We like the Globalstar system architecture and see this as a turning point for the MSS industry and for Globalstar in particular.”
Efforts will be made to expand Globalstar’s product and service offerings by drawing upon assets and resources from the combined companies.
Rising demand for mobile satellite services spurred Globalstar to expand its coverage in the Middle East recently.
ICO is licensed to deploy a medium-earth-orbit (MEO) constellation 10,000 kilometers above the Earth, compared to Globalstar’s existing 48-satellite system that is 1,400 kilometers away from Earth. The ICO system would provide global voice and data communications with satellites that are to be built by Boeing [NYSE: BA]. International Launch Services is under contract to handle the launch of those large, 601- and 702-model satellites that would be modified for MEO orbit. Two ICO satellites have been launched, including one that was destroyed when an anomaly occurred shortly after liftoff. A total of eight ICO satellites are needed to provide global coverage.
ICO completed its financial restructuring in May 2000 when McCaw and his fellow investors purchased the company’s assets and formed a revamped ICO. Shareholders in the new version of ICO include Deutsche Telekom, Telekom South Africa, Telstra, Korea Telecom, and Agrani Holdings, as well as financial investors Clayton, Dubilier & Rice, Credit Suisse First Boston and Cascade Investments. Cascade is the private investment vehicle of Microsoft [Nasdaq: MSFT] Chairman Bill Gates, while Agrani is an investment vehicle of Indian satellite businessman Subhash Chandra. ICO’s board of directors has approved the company’s purchase of Globalstar. Also approving the deal were Globalstar’s general partners’ committee and creditors’ committee.
–Paul Dykewicz
Telesat Bucks Trend, Posts Positive Numbers
Telesat Canada, a subsidiary of BCE Inc. [NYSE: BCE], achieved a rare distinction for a satellite operator during first quarter 2003 by posting growth in net income and revenue.
In a period of weak demand, Telesat Canada bucked the trend by lifting its net income during the first quarter to C$22.1 million (US$15.5 million), up 75.4 percent from C$12.6 million (US$8.9 million) during the first quarter of 2002. The earnings increase stemmed from higher revenues and lower amortization, operating and other expenses that were only partially offset by higher taxes, company officials said.
The company boosted its consolidated revenues to C$79.2 million (US$55.7 million), up 2.6 percent from C$77.2 million (US$54.3 million) for the same period last year.
Telesat Canada’s results are more diversified than most satellite operators because the company also provides consulting services. The company generates roughly 40 percent of its revenues from non-satellite services.
Telesat Canada also posted an increase in its cash flow from operating activities, climbing 10.5 percent to C$49.6 million (US$34.9 million) from C$44.9 million (US$31.6 million) in the comparable period of 2002.
Highlights for Telesat Canada during the latest first quarter included:
- Signing a contract with Astrium to build a new satellite to replace the Anik F1. Anik F1R will be launched in 2005 to ensure continuity of telecommunications, broadcasting and Internet services for the Anik F1 customers.
- Selecting International Launch Services (ILS) to arrange for the launch of the Anik F1R satellite on a Russian Proton M/Breeze M rocket.
- Reaching a research and development memorandum of understanding with Storm Internet Services to build a joint satellite and terrestrial wireless technology infrastructure to showcase and test the viability of delivering high-speed Internet service to rural and remote areas with such hybrid capabilities.
- Restoring service on the Nimiq 2 satellite after an in-orbit anomaly caused a minor disruption of service on Feb. 20. Lockheed Martin [NYSE: LMT], the Nimiq 2’s manufacturer, concluded that the most likely root cause of the anomaly was an electrical short circuit due to foreign object debris affecting a single, power-carrying connector. Testing has shown that the satellite’s south solar array cannot be recovered. As a result, Telesat Canada is operating 26 transponders on the satellite and expects only typical array degradation over time, company officials said. Nimiq 2 is insured and Telesat Canada officials said the company would file a claim for the loss of the array.
Telesat Canada has managed to boost its revenues while reducing its headcount during the past decade. In 1993, the company employed 840 people, compared to a total workforce of just under 500 people today. At the same time, revenue has risen 75 percent, said CEO Larry Boisvert.
The company made history in 1972 by launching the first domestic commercial communications satellite in geostationary orbit. In addition to serving North America, Telesat Canada expanded into Latin America during the 1990s before pulling back due the dimming economic and growth prospects in that region.
–Paul Dykewicz
(Rajani Kamath, Argyle Rowland Communications, 416/968-7311)
