There is an allure about space that draws dreamers and schemers. This allure is not isolated to going into space, but exploiting it for business purposes here on Earth. Even dealmakers aren't immune. The latest to get bit by the space bug is hedge funder Philip Falcone, the founder of Harbinger Capital Partners, who according to The Wall Street Journal is planning to build a satellite phone venture.
Satellite-based ventures serving consumer markets have been nothing but problematic for executives. Perhaps the best example is Craig McCaw, the highly successful wireless entrepreneur who built McCaw Wireless into an industry leader before selling it to AT&T for $11.5 billion in 1994. McCaw then took his new fortune and teamed up with Microsoft Corp. (NASDAQ:MSFT) co-founders Bill Gates and Paul Allen and Saudi prince Alwaleed bin Talal to form Teledesic, an ambitious scheme to build a broadband Internet service provider leveraging hundreds of low Earth orbit satellites. Despite the high-profile names, the dream was never met as Teledesic halted operations and sold its spectrum licenses in 2003 after burning through more than $1 billion in capital, according to Space.com.
Teledesic was emblematic of the industry. In the late 1990s, there seemed to be as many satellite ventures as there are constellations in the night sky including Globalstar Telecommunications Ltd., Iridium and ICO Global Communications. All three competed in the nascent satellite phone market, and all three filed for bankruptcy. In fact, even after Teledesic, McCaw never gave up on his satellite dreams, and he acquired ICO out of bankruptcy and attempted (but failed) to buy Iridium. All three continue to fly, but the dream of offering cheap, satellite communications anywhere on Earth to the masses has still not been realized. Instead, most provide service to the maritime industry.
As for McCaw, even he has finally shaken off the space bug, and instead focused his attention on terrestrial, wireless communications via Clearwire Corp. (NASDAQ:CLWR).
So why does Falcone think he can buck the trend? His plans does in fact sound as familiar as the stories of prior failed ventures. Falcone reportedly wants to merge SkyTerra LP, formerly known as Motient Corp., with Inmarsat plc, which already offers satellite phone service, to achieve his dream. McCaw had tried this many times in the past with no success. However, Falcone's plan reportedly involves licensing technology to wireless carriers, allowing for roaming into the satellite network rather than competing with them. Perhaps this partnering approach will provide the necessary difference to make this space-based dream a reality. - Matthew Wurtzel
See story about Falcone from The Wall Street Journal
See related story about Iridium from Dealscape
See related story from 2000 about satellite ventures from The Daily Deal (Pipeline subscription required)
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