McCaw certainly has proven his investment and visionary prowess in the world of wireless. Time will tell if he can extend his magic touch to satellites, but he appears well on his way.

On the one hand, Iridium and ICO have had problems finding suitable and sizeable markets. No matter who owns Iridium and ICO, each system has to contend with cellular (growing penetration and falling rates) and, in several developing countries, low-cost GEO systems such as ACeS and Thuraya.

On the other hand, McCaw could get the bandwidth and operational control of Iridium and ICO for a fraction of their system costs. The latest plan to acquire Iridium would have eliminated the company’s debt and reduced annual operating expenses to approximately $108 million, allowing the system to become more competitive with low-cost competitors. However, McCaw has since withdrawn his bid for Iridium.

McCaw’s latest plan, revised Feb. 29, proposes acquiring ICO to add data services at 64+ Kbps, provide handsets that work indoors as well as outdoors, and provide global IP services in a 10-satellite middle-Earth-orbit (MEO) system that plans to launch services in early 2002 and begin generating customer revenue in late 2002. McCaw’s ICO investment of up to $550 million would allow him to gain control of a system that cost more than six times that to build.

The conventional wisdom is that McCaw is putting money into ICO to 1) get an earlier start into the satellite industry than he would with Teledesic, which isn’t scheduled to begin service until 2004, 2) bolster the general outlook of the satellite industry, including Teledesic, 3) use ICO as a marketing and technology training ground in preparation for Teledesic, and, most often mentioned, 4) combine ICO in some form with Teledesic.

Teledesic, McCaw’s proposed 288 satellite, $10 billion system, comes up often as a reason for investing in ICO. Let’s take a quick look at the company’s funding and spending.

On the funding side, company sources say that Teledesic has raised approximately $1.5 billion including $750 million in cash and development work from Motorola, $200 million from Prince Alwaleed Bin Talal, $121 million coordinated by the Abu Dhabi Investment Co., and $100 million in cash and development work from The Boeing Co. [BA].

However, there’s no indication how much the company has raised in hard-and-fast cash as opposed to commitments. Moreover, Motorola and Boeing may have written off as much as $200 million and $50 million, respectively, of their investments in Teledesic.

Spending numbers are even harder to come by. We extrapolate employee cost as one measure of Teledesic’s spending to date. Teledesic had approximately 60 employees in September 1996, 100 employees in October 1997, and has approximately 140 now. Using $125,000 as an average employee expense, the company spent roughly $52 million from 1996 to 1999 on personnel, not much on a key resource in a $10 billion project.

Lastly, by the time Teledesic is scheduled to come online–in 2004–terrestrial systems will have been built out even more and several other broadband satellite systems, such as Hughes Electronics’ [GMH] Spaceway, Lockheed Martin Corp.’s [LMT] Astrolink and Loral Space & Communication Co.’s [LOR] Cyberstar are expected to be providing service.

Craig McCaw’s Major Existing and Planned Holdings