Gates, others invest in satellite venture

Microsoft chairman Bill Gates and several international investors yesterday announced that they have invested almost $US300 million in ICO-Teledesic Global, a company that says it plans to become a global provider of wireless "internet-in-the-sky" satellite communications services, including telephone, internet access and broadband services.

The investments are part of the $2.1 billion that ICO-Teledesic -- headed by wireless mogul Craig McCaw -- needs to launch its services. New ICO plans to begin offering its wireless internet services and other packet-data services in 2003; the Teledesic unit plans to begin delivering broadband data to mobile phones in 2004.

According to London-based ICO-Teledesic Global, Gates has committed to invest $100 million, and New York private investment firm Clayton, Dubilier & Rice pledged $150 million and has the option to invest up to an additional $200 million. Other investors have committed to $42.5 million, according to ICO-Teledesic Global spokesman Roger Nyhus.

ICO-Teledesic Global has not yet set a date for the launch of the first of its 12 satellites, Nyhus said.

A Microsoft spokeswoman said Gates' investment is private and referred calls on the matter to ICO-Teledesic Global. The company said Gates was funding the venture through Cascade Investment LLC, his private investment vehicle.

In 1994, Gates and McCaw were primary investors in Teledesic, which ICO acquired this (northern) spring. The Boeing Co, Motorola, and The Abu Dhabi Investment are also investors in Teledesic.

The infusion of capital into ICO-Teledesic Global comes at a time when other satellite telephone projects are not faring well, causing investors to look carefully at funding additional satellite telephone ventures.

David Schweikle, director of Boeing's Delta rocket division, which will launch Teledesic's satellites, said the satellite communications market isn't as robust as it was two or three years ago, as exemplified by the failure of Iridium, a satellite-base mobile phone company initiated by Motorola.

Two or three years ago, "low earth constellations were being considered by many companies, and people were looking at this as a lot of opportunity", he said. "But with problems of Iridium and ICO, it has become more of a wait-and-see (atmosphere), and the financial market is taking a step back to see how the market works out. I don't think we'll see it sort out until 2003 -- until companies figure out what makes good business sense."

However, David Kastenbaum, an analyst at the New York-based ING Barings, said investors are more willing to invest in ICO-Teledesic Global for exactly that reason -- it has figured out what makes good business sense.

"This is a different business model than Iridium was," Kastenbaum said. "This is broadband and mobile internet, not telephony. And they have some strong supporters who could definitely make it happen."

Nyhus agreed. "Sophisticated investors are able to distinguish among business plans," he said. "And CD&R and Bill Gates are smart money."

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