ICO invests $US4.8b in mobile satellite network

  • Mark Jones (Computerworld)
  • 16 December, 1998 12:01

ICO Global Communications is preparing to launch its $US4.8 billion global mobile satellite telecommunications service by August 2000 in a move aimed squarely at its competitor Iridium.

Michael Rugala, ICO's regional general manager Asia Pacific, said the company believes Australia will generate sufficient demand for the service, offering users dual mode GSM or satellite coverage from the one handset.

ICO is expecting to complete its service agreement negotiations with Telstra by January 1999, allowing ICO to use Telstra's national GSM network. Telstra will switch traffic to other GSM networks such as Optus or Vodafone where needed.

Rugala said the Telstra agreement is part of ICO's plan to rely on service partners to resell its services and provide customer billing and service functions, leaving ICO's call centre to provide "global support".

Rugala said ICO is pitching its satellite roaming as a value-added service to existing CDMA or GSM networks around the world.

The company is living on analyst predictions the mobile satellite market will be worth between $US5 and $US30 billion in the future.

However, executives admitted the company has not conducted or received any research on projected user take-up of hand-held satellite telecommunications.

Bob Phillips, ICO vice president of regulatory affairs, said industry predictions vary wildly from between five and 40 million users, once players such as ICO, Global Star and Iridium bring their services into full operation.

However, even when ICO's network is running, Rugala said calls via satellite will actually account for a small portion of the network traffic. "We expect to use GSM 95 per cent of the time," he said.

ICO is hoping the offer of an "instant network" at relatively low cost will attract users from the maritime, transport, aviation and aerospace industries.

ICO-compatible handsets are currently being designed by companies such as NEC, Mitsubishi and Samsung, with expected retail costs of between $US500 and $US900 per handset - or about one-third the cost of Iridium's handsets.

Rugala said the average satellite call currently costs around $US1.95 a minute.

ICO Global Communications is supported by up to 60 companies worldwide, particularly telecommunications carriers such as Deutche Telecom and Telstra, with 40 per cent of its investors located in Asia, ICO executives said.

According to ICO, no one partner is allowed to invest in more than a six or seven per cent stake in the company.

Rugala said ICO has raised $US2.7 billion of the $US4.8 billion needed to see the network - complete with 12 satellites - fully operational. He said around $US2 billion came from ICO's investors, with the remainder from avenues such as its Initial Public Offering (IPO) on July 31, 1998.

Rugala believes the company will not turn a profit until 2001.