A Q&A With Teledesic
Several industry analysts continue to express doubts about Teledesic based on the fact it has yet to line up service provider and financial partners other than Bill Gates, Craig McCaw and Boeing. It should be noted, however, that Teledesic is not alone in it's failure to point to carrier or service provider partners. Only a couple of the broadband players Network Computing surveyed provided explicit information about service provider partnerships (hyperlink to chart)
, with many contending that is too early for this type of information to be firmed up or announced. Recent reports also indicate that Boeing and Teledesic are at odds over cost projections for the $9 billion project. The following Q&A with Teledesic spokesman Roger Nyhus, is based on the responses of multiple Teledesic executives to these cost projection and partnership issues.
Q: Teledesic has been criticized in the press recently for being unable to win firm support from large carriers or service providers. How long has Teledesic been working to gain such support? Is it accurate that it has yet to win support?
A: We do not agree that it is necessary or even desirable to sign up service provider partners right away. Teledesic is five years away from service. It is not necessarily optimal to lock in our
distribution partners at this time. The telecommunications landscape is very dynamic--the "ideal" partner today could be very much less so five years from now. Accordingly, we are in
no hurry to sign up such partners.
Unlike the proponents of other global satellite systems, Teledesic is not a manufacturer--we are not doing this as a way to sell satellites or other equipment. We are committed to this as a service business. Distribution strategy is key to that, and it is not something that can be
comprised as part of a financing effort. By contrast, the manufacturers are more concerned simply with finding someone to pay for their satellite systems. If they have to give away the service business to do that, they will.
We have no immediate need for financing. We are fortunate to have investors with a long-term perspective who can fund our continuing needs over the next couple of years. We will bring in additional investors and service provider partners in due course--the right partners at the right
time.
Q: Criticism also revolves around a belief on the part of some that Teledesic is underestimating its overall costs. Have Teledesic partners and suppliers ur
ged that the company reexamine its cost estimates? Is Teledesic doing so? Will Teledesic do so?
A: We have no reason to do so--all our work to date confirms our cost targets.
Q: What is your reaction to those who say $9 billion is too low and that the project will cost in excess of $15 billion?
A: [They] have no unique insights into the work we or our suppliers have done or are doing. Their opinions are just that.
Q: Is Teledesic's relationship with Boeing in any way threatened as reports indicate?
A: No.
Q: Is it necessary for Teledesic to find more equity investors this year to act as a base on which to arrange further finance?
A: No
Q: How does Teledesic explain the cost differentials between itself and Motorola--where Motorola Celestri plans to spend almost $15 billion on just 63 LEOs and 9 GEOs and Teledesic plans to spend $9 billion on 288 LEOs?
A: Good question. Ask Motorola (I believe their estimate is $13 billion+, not including the GEOs). Their sate
llites will be about twice as heavy as ours, but even that doesn't account for all the cost differential. Our cost per satellite is about the same as [Motorola-led] Iridium, and we will be buying four times as many (and hence will have greater economies of scale).
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