Motorola Inc on Tuesday said it plans to build a $12.9 billion satellite network to provide telecommunications services anywhere in the world.
The proposed 63-satellite Celestri programme would be Motorolas third, making it a pioneer in the satellite communications network.
Most telecommunications systems at present use wires or Earth-based cellular stations.
However, Schaumburg, Illinois-based Motorola faces a substantial risk in developing the Celestri system, analysts said. Costs of these programmes are high and the technology is largely unproven.
Its still very much in the conceptual stage, said Robert Wilkes, an analyst with Brown Brothers Harriman.
Motorola has asked the Federal Communications Commission (FCC) to authorise Celestri, a satellite system to provide multimedia, data, voice and video services to residential users, businesses and even telecommunications service providers anywhere in the world.
Motorola spokesman Robert Edwards said the company hopes to begin providing Celestri service in 2002, meaning satellite launches will have to begin by early 2001.
We are very confident. This is well within Motorolas core competencies, Edwards said. Motorola has been involved in the space business since the late 1950s.
The news helped boost Motorola shares to a new 52-week high of $72, before it closed $1.25 higher at $71 in consolidated trading on the New York Stock Exchange. Today, investors are seeing the glass as half full, not half empty, Wilkes said.
Celestri would become Motorolas third satellite venture, in addition to its stake of about 25 per cent in Iridium LLC, a global telecommunications network worth an estimated $3.4 billion. Iridium includes Iridium World Communications Ltd and numerous other companies.
Motorola also plans to build M-Star, a network for high-speed, high-volume data transfer. At least some of the technology used in M-Star will be embedded in the Celestri system.
But, the technology giant faces a large cost to launch the new satellite systems.
Iridium is going to cost them as much as 40 cents (a share) a quarter, said another analyst, who asked not to be named. He said the initial losses will likely be in 1999 and 2000 as the service is rolled out. I think a transaction such as this will cost even more, he added.
Satellite systems such as Iridium and Celestri are seen as Motorola chief executive Christopher Galvins vision. His grandfather, Paul Galvin, founded Motorola in 1928 to manufacture car radios and has been credited with inventing the two-way radio. Chris Galvins father, Bob Galvin, took the company into its next generation with the cellular telephone business.
Although a leader in the satellite industry, estimated to grow to $15 billion by the year 2005, Motorola is not without its competitors.
Globalstar Telecommunications Ltd, for example, said it plans to launch its first satellites in the third quarter of this year.
Teledesic Inc, the communications start-up mostly owned by Microsoft Corp chairman Bill Gates and cellular phone pioneer Craig McCaw, plans to launch 288 low-orbit satellites by 2002 to form an Internet in the sky.
Motorola denied it was planning Celestri to go head-to-head with Teledesic, which in April gave a large contract to Boeing Co instead of Motorola.
We think there is plenty of room up there for people to share, Edwards said.
