WASHINGTON, MAY 17: Billionaire investor Craig McCaw has decided to merge his planned Teledesic LLC "Internet in the sky" with ICO Global Communications Ltd.'s satellite-phone project, and Hughes Electronics Corp. is likely to be the big winner in the initial phase, according to people familiar with the matter.With London-based ICO expected to emerge from bankruptcy and McCaw moving to increase his control over that company, industry officials said the moves could mean more than $1 billion in extra revenue for Hughes, El Segundo, Calif.The satellite-making unit of Hughes is slated to direct all engineering, systems-integration and testing efforts for ICO, and may supply as many as eight additional satellites, beyond the 12 already announced by the venture, these officials said. The Hughes unit is in the process of being acquired by Boeing Co.Down the road, executives of the Hughes unit are betting that the enhanced role in ICO's development will give them an edge in supplying the larger, evolving Teledesic venture as well. Within a week, McCaw is expected to merge ICO into a new holding company, ICO-Teledesic Global Ltd., which will manage both satellite projects.ICO Chief Executive Richard Greco is expected to step down, and Russell Daggatt, a longtime McCaw aide, will be named chief executive of ICO-Teledesic Global. Daggatt has been vice chairman of Teledesic. McCaw, who made two fortunes in the cellular-phone business, will serve as chairman of ICO-Teledesic Global.According to industry officials, McCaw's latest strategy envisions a two-phase plan under which ICO begins transmitting voice and data by late 2002 or early 2003 and Teledesic's revised system kicks in years later.ICO filed for bankruptcy protection last summer, two weeks after the Iridium LLC satellite-phone system also sought bankruptcy protection. Now, ICO expects to raise at least an additional $2.1 billion. McCaw's team has been tinkering with ICO's ground system so that the project will be able to transmit computer traffic at 144,000 bits per second, roughly three times as fast as a conventional modem.Teledesic was designed to transmit computer traffic at even faster speeds to portions of the Earth not served by fiber-optic lines. But the $10 billion-plus, 288-satellite project has been stalled for almost a year, amid waning investor enthusiasm for satellite deals. Teledesic's investors include Microsoft Corp. Chairman Bill Gates and Saudi Prince Alwaleed Bin Talal.It's not clear how the two systems would be combined. Among other differences, their satellites are supposed to be in different orbits, with the ICO satellites much higher than Teledesic's. According to a number of industry officials, Teledesic is currently mulling designs calling for 70 or fewer satellites."We see areas of partnership" with ICO and are "deeply engaged" in hammering out final details, William Owens, co-CEO and vice chairman of Teledesic, told an industry conference last week. Owens added that Teledesic is "very interested" in higher orbits because they allow "global coverage with fewer satellites." Industry officials say that a final design for combining the two projects could take several months.Spokesmen for Hughes and ICO declined to comment. A spokesman for McCaw denied immediate plans to increase the number of ICO satellites. "We're not announcing any changes in our constellation in the near future," the spokesman said. (WSJ)
