Greg
Motorola Wavering on Teledesic?
by Joanna Glasner
3:00 a.m. 19.May.99.PDT
Teledesic, a US$9 billion satellite network that's
scheduled to be in operation in 2003, is facing a
snag in its plans to build a broadband "Internet in
the sky."
The company's main contractor, Motorola, still
hasn't signed a contract to build the satellite system
after about a year of negotiations.
Last week, Motorola (MOT) told several
subcontractors to stop working -- at least
temporarily -- until contract negotiations end. The
company also moved some workers on the project to
other areas and eliminated some temporary
positions.
The move was a "a small, internal realignment,"
carried out so that Motorola would focus on other
areas of the telecommunications business, said
Robert Edwards, a spokesman for Motorola's
satellite telecommunications group.
Satellite industry executives, however, saw the move
as a sign that Motorola may be wavering in its
commitment to the Teledesic project.
"Everybody in this industry is gun-shy at the
moment," said Alden Richards of Space Machine
Advisors, which sells insurance to satellite
companies.
Motorola's last big satellite venture -- the $5 billion
Iridium phone network -- has generated huge losses
for the company. Meanwhile, shares of most satellite
companies have been suffering on Wall Street,
dampening investor enthusiasm for another satellite
venture.
In addition, the US launch industry is in crisis. In the
past year, several rockets have exploded or failed to
put expensive satellites in the correct orbits, raising
concerns that upcoming satellite projects will have
bigger-than-expected losses.
Teledesic, founded by Bill Gates and cellular-phone
mogul Craig McCaw, plans to put 288 satellites in
low-earth orbit to transmit data at speeds up to 2,000
times the speed of a dialup modem.
The disappointing performance of Iridium's business
shouldn't affect the broadband network's ability to
make money. Although both projects involve
networks of low-earth satellites, Teledesic's
business plan doesn't have much in common with
Iridium, said Roger Nyhus, a company spokesman.
Teledesic said that its system will be able to support
a few million simultaneous users. The company
expects most of its money to come from business
customers who need high-speed Internet access in
suburban or rural areas or in developing countries.
But building the satellite system will take longer
than Teledesic expected. The company now says
that it plans to launch commercial service in late
2003 instead of its original launch date of 2002.
And Teledesic won't be beaming broadband to
anyone unless it hammers out an agreement with
Motorola, which is a key investor as well as a
contractor. The last time Teledesic disclosed the
level of participation from its main investors,
Motorola was still the biggest stakeholder, with a 26
percent share of the venture.
"I don't think they're skittish about the satellite
project, but they don't want to have the same
amount of risk that they have with the Iridium
project," said Luke Szymczak, an analyst with
Prudential Securities.
Even if Motorola backed out, Teledesic would still
have a lot of big-name backers. McCaw and Gates
each own 21 percent of the venture. Billionaire
investor Prince Alwaleed Bin Talal has 11 percent,
and Boeing is in for 4 percent.
Neither Teledesic nor Motorola set a date for when
they expect to sign the contract. Industry watchers
said that it makes sense for Motorola to take its time.
"They've got to be nervous as hell," Richards said.
"They're thinking, 'Do I really want to get into
another multibillion-dollar satellite system?'"
Related Wired Links:
Iridium: Edsels in the Sky?
10.May.99
Teledesic's Future Tied to Iridium
22.May.98
Teledesic Mounts Lead in New Space Race
14.Oct.97