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Cell phone pioneer may enter satellite game

If Craig McCaw's history is any indication, the seemingly dreary future for the satellite phone industry may soon be brighter.

If Craig McCaw's history is any indication, the seemingly dreary future for the satellite phone industry may soon be brighter.

McCaw, the cellular phone industry pioneer who parlayed the sale of his father's cable-TV company into communications investments worth billions, is reportedly close to a $600 million offer for the world's first satellite phone service, Iridium, which filed for bankruptcy protections last year.

McCaw also is set to invest about $1.2 billion in ICO Global Communications, in the aftermath of that company seeking bankruptcy protections. The offer is pending a bankruptcy court judge's approval.

Following months of poor sales, sagging stock prices, executive resignations and general skepticism about consumer demand for phone services that are available even in the world's most remote regions, McCaw's interest in Iridium and ICO is sure to raise some eyebrows.

But McCaw's substantial investments, and his proven track record, could be just the boost those companies need to get back on track, according to analysts.

"He has the Midas touch," said Sean Badding, an analyst at The Carmel Group, which researches the satellite industry. "This guy has put so many great deals together in the past you almost want to give him the benefit of the doubt."

McCaw sold his cellular phone and paging companies to AT&T in 1994 for $11.5 billion and $5 billion in assumed debt, and invested in a languishing Nextel Communications at about the same time. Now Nextel is one of just a handful of national wireless service providers and is valued at $43 billion.

"If you're going to be a skeptic and bet against him, take your chances," said Bob Ratliffe, vice president at Eagle River, the holding company that manages McCaw's communications investments.

Analysts say McCaw is hoping to get the satellite assets in what amounts to a fire sale.

"The strategy is to try and get control of these companies for as little as possible," said Elliott Hamilton, senior vice president of wireless research for the Strategis Group. "If (McCaw) wants to play in the satellite game--if he thinks there's a business there--he can snatch up a lot of hard-earned assets for pennies on the dollar."

Analysts said McCaw, if successful at gaining control of Iridium and ICO, is likely to integrate their services with his other properties, such as fiber-optic and fixed wireless carrier Nextlink, mobile phone service provider Nextel, and Teledesic, an emerging satellite Internet firm.

"(Iridium) still has a lot of value, especially if you can assemble some of the assets of these various companies," Hamilton said.

Some analysts speculate that McCaw may try to shift the focus of the satellite phone companies from their mobile-user target, instead providing communications services to fixed locations.

Whatever McCaw decides to do with his communications companies, analysts agree the risk of investing in Iridium and ICO is low--considering the potential upside. Many analysts remain skeptical about the future of Iridium and ICO Global, but admit McCaw may see something that others don't.

"He's throwing millions of dollars into these companies and right now it doesn't look like there's going to be a payoff. And, if it does, it's going to be two or three years before he gets the payoff, so it's a long-term bet," Badding said.

"But you can't write this guy off," he said. "Another six to 12 months will give us a clearer idea of how these investments might pay off. Right now it's just a puzzle he's trying to put together."