Craig McCaw to Buy Iridium, Analyst Says
Craig McCaw, who brought cellular telephones into common use, is close to buying cash-strapped Iridium after making a $1.2-billion bid last month for rival ICO Global Communications Ltd., an analyst said.
McCaw’s bid for the satellite-telephone company was made Friday and is still being negotiated with Motorola Inc., Iridium’s biggest investor, said SoundView Technology Group analyst Tim O’Neil. He declined to say where he got the information.
If successful, McCaw would gain the two companies--both of which filed for bankruptcy protection in August--at a fraction of the money spent building the satellite systems, O’Neil said. Such a move by McCaw also would create a strong rival for Globalstar Telecommunications Ltd., another satellite-based phone network, which is 45% owned by Loral Space & Communications Ltd.
“Combining this purchase, if it goes through, with the purchase of ICO gives McCaw the credibility, authority and a product that potentially could be priced competitively to cellular, with no debt and worldwide coverage,” O’Neil said. “The combination of all these things gives him a competitive advantage over Globalstar.”
McCaw spokesman Roger Nyhus said McCaw is still exploring an investment opportunity with Iridium and would not comment on O’Neil’s report. Iridium spokeswoman Michelle Lyle declined to comment on the purchase, as did Motorola. A Globalstar official wasn’t immediately available for comment.
McCaw Cellular Communications was the largest U.S. cellular-phone company before its 1994 sale to AT&T; Corp. McCaw, 50, is the largest investor in wireless company Nextel Communications Inc. and is the founder of Teledesic, a satellite-data network.
Iridium had difficulty marketing its handsets, which analysts said were too bulky and costly.
If McCaw is able to combine the global systems of Iridium and ICO, then Globalstar, “still a regional system, would now have an immediate, potentially lower-cost competitor,” O’Neil wrote in a report.
Iridium, which is based in Washington, filed for Chapter 11 bankruptcy protection after it failed to attract enough subscribers to its 66-satellite global phone network. The company, which defaulted on $1.55 billion in bank loans, had an estimated 20,000 subscribers as of August. It had expected 600,000 by year end.
London-based ICO Global also filed for bankruptcy protection in August, after it failing to raise enough financing, raising questions about the market for satellite-based phone services.
Shares of Iridium World Communications Ltd., which were delisted from the Nasdaq Stock Market on Nov. 22, rose 13 cents Wednesday to $2.31 in trading on “pink sheets,” a list published daily that gives information on over-the-counter stocks not listed on Nasdaq. The stock, which is the publicly traded portion of Iridium, has fallen almost 95% this year. Globalstar stock fell $1.63, or 6.7%, to close at $22.38 on Nasdaq. The shares have risen about 11% this year.
