ICO Global Communications

is -- unlike fellow dead satellite phone dream

Iridium

-- rising from the grave. Its second coming may make for a formidable competitor to

Globalstar Telecommunications

(GSTRF)

.

A Delaware Bankruptcy Court Wednesday approved a reorganization plan for ICO, which will allow the company to emerge from Chapter 11 bankruptcy on May 15. The company, to be called

New ICO

, is seeking former stakeholders and new strategic investors to join its $700 million "exit financing." The financing was underwritten last year by telecom entrepreneur Craig McCaw's

Eagle River Investments

and kindred entrepreneurial spirit Subhash Chandra, chairman of India's largest media company

Zee Telefilms

.

McCaw is expected to combine ICO with his Bellevue, Wash.-based

Teledesic

to create a satellite system that can transmit voice and data to both fixed and mobile communication devices, according to industry observers. Teledesic has the data-to-fixed half of the puzzle and struggling ICO would provide the voice-to-mobile-devices piece. Privately held Teledesic -- founded by

Microsoft

(MSFT) - Get Report

Chairman

Bill Gates

and McCaw -- could merge with the New ICO and go public as one entity, observers say. ICO officials declined to comment. Teledesic is still three years from launching satellites, and ICO launched its first satellite in March, but something went haywire and it crashed into the Pacific Ocean.

"It makes sense to combine ICO and Teledesic in a couple of ways," says James Reynolds of

DFI International

, a Washington-based aerospace consulting firm. "It allows McCaw to buy a bunch of satellites at a discount and get a jump on the competition for offering broadband services." Teledesic, which has undergone several constellation reconfigurations in the last several years, is under pressure by competitors to utilize its licenses or lose them, says Reynolds. ICO's ready-to-launch satellites could help alleviate some of that pressure.

The original ICO system was designed to place traditional telephone calls through a global satellite system, which is what Globalstar of San Jose, Calif. now offers. Globalstar, however, may be threatened by a company such as the New ICO, which will ostensibly be able to offer the same services it does and more. New ICO will be a broadband system, which will allow for high-speed transmission of data, while Globalstar's is a slower, narrow-band system. As

TheStreet.com

reported on April 28,

Globalstar has recently fallen from favor. Shares of Globalstar were up 3/8, or 3%, at around 12 3/8 in midmorning trading. Globalstar's 52-week high was 53 3/4.

ICO, headquartered in London, filed for bankruptcy last August after its $5 billion competitor, Iridium, collapsed. The company was unable to raise the funds necessary to complete its satellite system in the wake of Iridium's widely publicized problems with its operations and business plan. Iridium has since been liquidated.

The $700 million private placement of Class A shares priced at $20.90 will be closed to investors next Wednesday. It could not be determined who -- other than Eagle River and Chandra -- will partake in the exit financing, but one person close to ICO said at least $250 million of the deal will be underwritten by other investors.

Original equity investors will suffer substantial dilution under the ICO reorganization plan, receiving one share of New ICO equity for every 207 shares they previously owned. They will also receive 15 warrants for every 207 shares of old equity. These warrants carry a strike price of $90. The New ICO will remain private until March 31, 2001, unless the company is involved in a merger.

McCaw also underwrote ICO's first two rounds of financing after the company filed for bankruptcy. Those investments of $500 million will be converted into equity upon the company's emergence from bankruptcy, with $225 million of Class A shares worth $9 per share and $275 million of Class B shares worth $17.74 per share. Class B shares have super-voting rights, with each share equalling 10 votes.