US space and defense electronics firm TRW Inc and UK mobile satellite telephony company ICO Global Communications, former competitors in the medium earth orbit satellite mobile communications sector, have joined forces, with TRW taking an equity stake in ICO. The deal sees the companies settling a number of patent lawsuits over satellite technology used by ICO and TRW’s Odyssey Telecommunications Ltd joint venture with Teleglobe Inc (CI No 3,241), which would have competed with ICO. Under the agreement, TRW will effectively pull out of its Odyssey system, and is handing back the license it received from the US Federal Communications commission, to free up the spectrum for other space-based global personal communications services. Both companies will drop the patent lawsuits and grant each other cross-licensing agreements for their respective patents. TRW will also get certain distribution rights in the US for ICO products and services. In a transaction obviously cooked up by lawyers and accountants, TRW initially invests $50m in ICO, but ICO will pay this money back in two installments, $25m when the deal closes, and $25m by mid-1999. In addition to the settlement of lawsuits and competition issues, TRW will also get 1.5 million shares in ICO, or approximately 7% of ICO’s current outstanding shares, with a face value of $150m. ICO says the real benefit to the company, which hopes to launch its service in the year 2000, is that it has one less competitor, and has gained TRW’s strengths and market presence. TRW will provide engineering expertise to ICO. ICO will now be the only medium earth orbit player, although low earth orbit rival Iridium will also offer the same service as ICO, namely communications from a mobile handset to anywhere on earth, via a cellular network when there is one available, and otherwise via satellite.
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