U.K. firm nabs Globalstar majority stake
A court awards cellular pioneer Craig McCaw's ICO Global Communications a majority stake in the bankrupt U.S. satellite phone provider--as long as it invests $55 million.
The U.S. Bankruptcy Court in Delaware awarded ICO a 54 percent stake of Globalstar on late Friday. The transfer will only take place, however, if ICO makes a $55 million investment in the company. U.K.-based ICO was one of several bidders for Globalstar's assets after the U.S. satellite phone service provider filed for bankruptcy protection in November 2001.
Satellite phone companies were launched with much fanfare in the 1990s, but have since become symbols of billion-dollar investments gone bad. Though satellite phone customers rarely experience the dropped calls or lost e-mail that cell phone customers complain of, the comparatively bulky handsets and expensive calls--about $6 a minute at the time--kept many people from choosing satellite service.
Globalstar and its major competitor Iridium have both filed for bankruptcy and re-emerged under new ownership. One of the first things each did was to reduce the selling price of its phone equipment and to cut call rates to under $1 a minute.
"The numerous bankruptcies throughout the industry have been indicative of the risks associated with providing innovative new services and the failure, to date, of mobile satellite service," ICO Chairman McCaw said in a statement.
Major Globalstar creditors Loral Space & Communications, Qualcomm and other bondholders will own the balance of Globalstar, ICO spokesman Todd Wolfenbarger said.
San Jose, Calif.-based Globalstar, which has 80,000 subscribers, becomes the second satellite phone company with a large stake held by ICO. The other is Teledesic, based in Bellevue, Wash., which has yet to launch a commercial service and has significantly reduced its work force. Teledesic investors include Microsoft co-founder Bill Gates and Motorola.