TELEDESIC DECISION CASTS PALL OVER SATELLITE INDUSTRY
Teledesic decision to suspend operations and restructure business (CD Oct 3 p12) is another indication slump for satellite telecom and broadband market isn’t over and new projects will continue to languish, analysts and industry officials told us. Company had planned ambitious 30- satellite constellation to distribute broadband and data services before concluding it was too risky to continue. “This happens in the course of a global meltdown,” Satellite Industry Assn. Exec. Dir. Richard DalBello told us: “The demand hasn’t been as strong as [Teledesic] had hoped. It appears Teledesic wants to bide their time. There is a tremendous amount of pain in the telecom market. It’s hard to mount aggressive new projects in this type of environment.”
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“A lot of companies that were blazing new trails are pulling back because of what’s happening in the market,” satellite attorney Henry Goldberg told us: “It’s a sad fact of life. Everyone seems to be hunkering down. It’s not the time to be building new stuff.” Satellite attorney Phil Spector told us that Teledesic action probably showed how “difficult it is to obtain funding” for telecom and Internet projects. “It’s a tough market.” Satellite attorney Raul Rodriguez said he had predicted Teledesic failure 7 years ago: “Too fancy. Too many satellites. Insufficient market. It was only a matter of time. Unfortunately, this decision on their part to pull out at this time will have ramifications for the entire industry.”
Teledesic problems are sign of times, satellite consultant Leslie Taylor told us: “I'm sorry to see them to take a pause in their forward progress. I hope they will pick it up again when the investment climate is better.” Satellite analyst Timothy Logue said he remained confident there was market for Teledesic and other satellite projects but decision was “indicative of the state” of satellite industry. “We haven’t found the right technology to serve it and the financial support to go forward.”
Despite doom and gloom surrounding announcement throughout industry, Teledesic isn’t totally abandoning project and is holding out hope for last-min. miracle to salvage business, Chmn.-Co-CEO Craig McCaw said: “We believe the Teledesic service will provide unique and measurable benefits to the world and we are looking at scenarios to preserve that ability for that service to be realized.” Co- CEO William Owens called Teledesic “worthy mission” and “viable business.”
Bottom line for Teledesic is it needs unspecified amount of money from investor or partners “to take some of the risk,” spokesman said. He said $500 million had been invested in Teledesic and company couldn’t see moving forward without financial commitment from outside party. “There is a strong possibility that we may not do this,” spokesman said. He said final decision would come quickly because first Teledesic satellite must be operational by 2004 under FCC milestones. If company doesn’t move forward, spectrum probably would be reallocated by FCC, spokesman said.
Teledesic decision “won’t have an impact” on New ICO (CD July 22 p3), which also is headed by McCaw Group, ICO Vp Gerry Salemme told us: Last Nov., ICO Global and Teledesic ended proposed merger because of regulatory problems. McCaw has invested more than $1.2 billion in 2 projects. Salemme said “we have a different ownership structure. The Teledesic decision is unrelated.” Salemme said he didn’t believe Teledesic was at end of road yet. “It ain’t over until it’s over.”