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Thursday, March 15, 2001 - Page updated at 12:00 AM

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Satellite firms link up: McCaw's New ICO, Ellipso partners in telecom network

Seattle Times technology reporter

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Craig McCaw's satellite venture New ICO has formed a partnership with Ellipso to launch a satellite telecommunications system in 2003, a year sooner than New ICO had projected.

Financial terms were not disclosed, although the venture potentially could lead to London-based New ICO acquiring Ellipso, which is headquartered in Washington, D.C. Until now, both companies worked independently on building a satellite network to provide voice and data services to mobile phone and data users.

"The folks that have tried it on their own have failed," said Roger Nyhus, spokesman for ICO-Teledesic Global, a holding company that owns both New ICO and Bellevue-based Teledesic. "Clearly we are learning from those mistakes.... Craig is looking for creative ways to create a viable mobile satellite service."

During the past two years, competitors Iridium and Globalstar Telecommunications both went down in flames in their multibillion-dollar efforts to build their own satellite network. Iridium filed for bankruptcy in August 1999. Globalstar halted payments on its debt to conserve cash in January. The companies were unable to build a customer base to cover costs and pay down debts.

The idea is appealing - global wireless service powered by a satellite network - but the reality was clunky phones and prices that customers weren't willing to pay.

ICO Global Communications also filed for bankruptcy protection in August 1999, before McCaw acquired the company and renamed it New ICO. After the acquisition, McCaw formed ICO-Teledesic Global as a holding company for New ICO and Teledesic.

Teledesic also plans to build a satellite network that offers voice and data service to fixed locations (vs. New ICO's mobile users).

McCaw serves as chairman of the holding group and the two satellite companies. The holding group has not completed plans to merge New ICO and Teledesic.

The New ICO-Ellipso partnership faces enormous challenges. Ellipso reported previously the company would need $1.5 billion to launch its satellite network. In a Securities and Exchange Commission filing last fall, New ICO said it will need $2.1 billion to launch its system.

Boeing unit Hughes Space and Communications already has built 12 satellites for New ICO, and ICO-Teledesic Global raised $315 million in private investment in July from Microsoft Chairman Bill Gates and others. The holding group reported two months later in a filing that New ICO and Teledesic had collectively lost $985 million since their inception.

Separately, Teledesic is looking to sublease its 75,000 square foot headquarters in Bellevue and move to a smaller office.

New ICO said Ellipso's intellectual property, staff and regulatory position made it attractive. Ellipso Vice President Gerald Helman said the two companies started talking three months ago. Ellipso, started in 1991, has 15 employees.

Helman expressed confidence that Ellipso and New ICO will avoid the pitfalls that doomed Iridium and Globalstar. He citied Ellipso's technology that focuses its satellites on the geographical areas with commercial potential.

"We don't propose to do things the way others have done it," Helman said. "We could build a system that would enable us to deliver service to a consumer for mobile voice or mobile data at 25 cents a minute wholesale, which is getting within competitive rates."

Sharon Pian Chan can be reached at 206-464-2958 or schan@seattletimes.com.

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