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McCaw Pursues Global Data Network Through Purchases

The cell-phone provider hopes to buy ICO and Iridium.

Craig McCaw, the pioneering cellular phone provider, is said to be close to developing a global voice and data network by merging the satellite phone systems of

ICO Global Communications

(ICOFQ)

and

Iridium

with his proposed

Teledesic

broadband network.

McCaw hopes to buy ICO and Iridium, both mired in Chapter 11 bankruptcy proceedings, at a discount and merge them with Teledesic to create a satellite network that would provide both telephone service and high-speed Internet access, according to a report in

The Wall Street Journal

.

Teledesic and McCaw's private investment firm,

TheStreet Recommends

Eagle River Investments

, are already leading a $1.2 billion bailout of ICO. Meanwhile, McCaw has provided $5 million to Iridium and hopes to acquire the company cheaply in a bankruptcy auction.

According to documents filed in U.S. Bankruptcy Court in Delaware last week, McCaw said he plans to transfer ownership of ICO to a new company, called New Satco for the moment. If he gains control of Iridium, he would merge it into that company as well and perhaps even add Teledesic to the fold.

"The idea is to pick up Iridium cheaply and run it for awhile to understand the market, the partners and the pricing," said analyst Armand Musey of

Banc of America Securities

. "Then when ICO is up and running, he can use the Iridium spectrum to increase data capability." Musey rates Iridium an underperform and his firm has participated in underwriting for the company. He has no rating on ICO.

The launch of Teledesic isn't scheduled until 2004. When the company was founded in 1990 by both McCaw and

Microsoft's

(MSFT) - Get Report

Bill Gates

, that timeline seemed appropriate enough. But with the rapid advances in the communications industry, McCaw and Teledesic are under pressure to get in the game sooner.

The acquisition of both ICO and Iridium could provide such an opportunity. Iridium's system of 66 satellites has launched already, but McCaw is likely eyeing the company's 50,000 customers who could migrate to the new service.

ICO has yet to launch, so more can be done with it. It is only due to launch its first satellite on March 12 and though its 12 satellites are better designed for data transmission than full-scale broadband transmission, it would take just a little adjustment to deliver the full-scale transmission.

"Over time, ICO would be expanded and could subsume Teledesic," Musey said. He added that this strategy incurs almost no risk because it will cost McCaw almost nothing to acquire these companies.