Teledesic suspends work on satellites

Teledesic, the Bellevue satellite-communications company founded by billionaire Craig McCaw, said last night it has suspended work under its satellite-construction contract with an Italian manufacturer and will significantly reduce staff.

The privately held company said it will evaluate possible business alternatives.

Begun in 1990, the self-touted builder of an "Internet-in-the- Sky" network has spent hundreds of millions of dollars over the past decade on design and development of its global satellite-system concept, said spokesman Todd Wolfenbarger.

"It does not make sense for the company to spend money as it is without a firm commitment from another partner or customer," Wolfenbarger said.

No details on planned staff reductions were immediately available.

With primary investors that included Boeing and Microsoft Chairman Bill Gates, Teledesic planned to build a 30-unit constellation of orbiting satellites that could link data networks from anywhere in the world, and provide fast Internet access and affordable phone service.

The company signed a contract with Alenia Spazio in January, calling for the Italian satellite maker to build the network's first two satellites.

Service was scheduled to begin in 2005, according to Teledesic's Web site.

Citing an "unprecedented confluence of events in the telecommunications industry and financial markets," Teledesic said it decided to suspend work because the returns to shareholders weren't "commensurate with the risk."

"We continue to believe that the Teledesic service would ultimately provide unique and measurable benefits to the world, and we are looking at scenarios to preserve the ability for that service to be realized," said McCaw in a written statement.

The wireless-communications pioneer, who is Teledesic's chairman and co-CEO, said the company is financially solvent.

In addition to Gates and Boeing, another primary Teledesic investor is Saudi Prince Alwaleed bin Talal, who invested $200 million in the company in 1998.

Boeing, the world's biggest plane maker, invested $100 million, according to Teledesic's Web site.

In April, Boeing, Teledesic and four other communications companies won federal approval to share airwaves to provide Web access from satellites that circle freely, rather than being in orbits fixed over one location on the Earth.