Murdoch's rival in space

As the satellite-phone star wars hot up, Peter Koenig meets the man who's set to play Han Solo to the BSkyB boss's Darth Vader: Profile; Olof Lundberg

OLOF LUNDBERG will be delayed. "He is doing a little DIY," his secretary says. We enter his office a few moments later and, although there is no tool kit on the conference table, ICO's chief executive is pink from the exertion of a re-hanging a print.

Lundberg is a heavy-set man with thinning hair and a broad brow that looks in need of frequent mopping. He tells a good Clinton joke, then - engineer by trade, serious by genetic disposition - he gets down to the task at hand: discussing satellite-based mobile phone networks.

The 59-year-old Lundberg traces his professional interest back to his boyhood in Gothenberg, Sweden, and his early interest in maritime communication. "I was a ham radio operator," he says. "I've been building radios ever since. Just more complicated ones."

Rupert Murdoch's BSkyB introduced the nation to satellite technology even though BSkyB is not directly involved in satellites. It leases transponder capacity from Luxembourg-based SES. Soon, however, Lundberg will mount a challenge to Murdoch.

A more unlikely match-up is hard to imagine. Murdoch, the nonpareil businessman, incorporates his mastery of satellite technology into his famously ruthless drive toward some never-to-come epiphany as the world's greatest media mogul. Lundberg loves satellite technology for itself, although he is no tekkie naif. He talks of "never doing anything at ICO except to generate a profit", and comes across as intelligent and crafty.

"Olof has a tremendous commitment to making ICO happen," says Geoffrey King, the head of British Telecom's satellite operations.

The relevant technology goes like this: In 1957 the Soviets sent Sputnik into orbit. In 1962 AT&T sent the first active relay satellite into orbit. On the mobile phone front "there were limousines in New York with big boxes in their boots and phones in the back in the 1950s," Lundberg says. By the mid-1980s these procrustean mobile phones had metamorphosed into the ubiquitous Yuppie props.

Satellite-base mobile phones entered the picture just eight years ago. During the 1990-91 Gulf War CNN's Peter Arnett made them famous as he broadcast from the roof of his Baghdad hotel. "Arnett's was suitcase-sized, 30 kilos," Lundberg says. "Then there was briefcase-sized. Then laptop. Now hand-held."

Jeremy Rose, founder of the St Albans-based satellite consultancy Comsis, explains that ICO is one of three major groups vying to dominate the yet- to-exist satellite-based mobile phone market. The market for them, Rose guestimates, could reach 30 million subscribers after the turn of the century - with the technology to switch back and forth between terrestrial and space networks.

ICO will compete against Iridium, a consortium sponsored by the US telecoms giant Motorola, and Global Star, a second US-backed consortium.

"Motorola formed Iridium in 1990," Rose says. "It was named for the 77th element in the periodical table of chemicals because the plan was to launch 77 satellites in a low earth orbit. Motorola subsequently cut the number of satellites to 66, but it didn't change the name to dysprosium, the 66th element, because dysprosium sounded like a medicine for tummy upsets."

Iridium has invested roughly $5bn (pounds 3bn). It is scheduled to switch on service on 23 September. Because its satellites will communicate with each other, as well as with land links, costs will be high. Iridium phones will cost roughly $3,000, Rose says. Calls will cost between $3-$5 a minute. "The service will be for the businessman who doesn't care about price," he adds. "The bloke who wants a guarantee he can ring anywhere in the world from anywhere in the world."

Global Star was set up in the wake of Iridium. Because its satellites will communicate less with each other, costs will be lower. So will its phones and call rates. ICO, by contrast, grew out of Inmarsat, a London- based inter-governmental organisation set up in 1979 to exploit satellite technology to improve maritime and aviation communication.

Inmarsat set up Inmarsat-P and entered the satellite-based mobile phone business. But its quasi-governmental status led it to spin off its commercial venture. In 1995 Lundberg, Inmarsat's director-general (and before that a Swedish Telecom employee) quit to run ICO.

The company has 58 shareholders who have put up $2bn of the $4.5bn investment needed for the launch of its service in 2000. Many are state telephone companies - many of them from the developing world - but there are private groups as well.

Because ICO has chosen to use satellites revolving in middle earth orbit it will only need twelve of them and they will last 12 years - not the five expected of lower earth orbit satellites. The disadvantage of MEO satellites is the transmission delay. But ICO says it has the technology to make this delay inconsequential. Rose calculates ICO phones will cost $750 with call charges in the $1 to $2-a-minute range.

ICO is denigrated by its rivals as a company still suffering from a non- commercial orientation. But Cynthia Boeke, editor of the Washington-based Via Satellite magazine, points out that success will turn in good part on relations with telecoms regulators round the world. "Lundberg has excellent relations," she says, "and it would be a mistake to underestimate him."

ICO plans to sell its services not only to globe-trotting businessmen, but also to such niche markets as long-distance lorry companies, and to governments looking to leapfrog existing telecoms technology to set up rural phone networks.

The company is due to get its first feedback from the market soon. Tomorrow its directors meet in Bangkok to discuss details of an initial public offering of shares in the $300m-$500m range. "Satellite ventures are hot on Wall Street," Via Satellite's Boeke says.

Who will win the battle to dominate the satellite-based mobile phone market is anyone's guess. "I know there's a market there," says BT's Geoff King. "But is there a market for three companies? I don't know."

"You cannot predict," says Comsis' Rose. "In the mid-1980s the experts said British Satellite Broadcasting with its squarial would beat Murdoch with his dish. Look what happened."

Could Lundberg really rival Murdoch as a presence in space? In a world of total inter-connectivity and inter-operability - the holy grail of information technology - anything seems possible, at least for now.