Iridium to cut service tonight

Iridium LLC, unable to find a qualified buyer to take on the company's debt and its constellation of 66 satellites, told a bankruptcy court on Friday that its service will effectively end as of midnight Friday night, Motorola, Iridium's principle investor, confirmed.

Also after midnightFriday, Iridium will begin liquidating its assets, Motorola spokesman Rusty Brashear, based in Schaumburg, Illinois, said.

Iridium told the US Bankruptcy Court for the Southern District of New York that a buyer for its operations couldn't be found and that Motorola will shut down Iridium's satellite service.

Brashear said that Motorola intends to offer a limited Iridium service in some areas of the world where individual gateway companies are still open. Iridium North America, Iridium Canada and Iridium South America, for example, will be definitely be open for a short period, he said.

The Iridium operations will be run by a skeleton staff long enough to cope with any Iridium customer needing to access the service in the case of an emergency, Brashear said. "We will provide a little bit of a cushion before the service is cut off, but it's a matter of weeks rather than months," he added.

Decommissioning Iridium's 66 LEO (low-earth orbit) satellites will take Motorola as long as two years, Brashear said.

Motorola has no plan to acquire any of Iridium's assets, Brashear said. The company's assets include a network operations centre in Washington, DC, along with the satellite network, he added.

Iridium's basic problem was that the company never managed to attract sufficient customers, Brashear said, estimating that Iridium had only amassed more than 50,000 customers since the company was set up.

Brashear said that Motorola felt that Iridium adopted the wrong business plan from the time the company was established, with Iridium trying to evangelise satellite communications as a replacement for cellular telecommunications. Motorola instead favoured promoting Iridium as a solution to phone communications in remote areas of the world where there was no existing fixed-line or wireless communications already in place, he added.

"If there's no market, you're building debt upon debt until you have a mountain of debt," Brashear said. Iridium had debts totaling about $US4.4 billion when it filed for bankruptcy protection.

Giga Information Group analyst Rob Enderle, based in Santa Clara, California, said in a telephone interview that he agreed with Brashear's take on Iridium's failure. "The price point for the product was way off," Enderle said. "There weren't enough customers willing to pay the high cost when there was cellular service available."

However, Brashear said that Motorola remains very proud about the technology the company had developed for Iridium. "We will continue to take risks (in technology) and offset those risks by taking a very conservative stance on our balance sheet," he added.

Iridium has been aggressively seeking a buyer since an investment group led by Eagle River Investments decided against submitting a plan to buy the satellite company, which filed for bankruptcy protection in August of last year after defaulting on two loans.

Motorola and other investors put together additional loans to keep Iridium afloat while a buyer was sought, but that financing expired February 15. Eagle River then stepped in with $5 million in financing to maintain Iridium's operations through March 6.

When Eagle River, an investment management firm owned by Craig McCaw that has interests in several telecommunication firms, including Teledesic LLC, decided not to pursue acquiring Iridium, Eagle River said it planned to focus resources instead on developing satellite-based data services.

Iridium was granted a funding extension on March 6 to operate only through Fri, according to a notice posted on the company's Web site.

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More about Eagle River InvestmentsGatewayGiga Information GroupIridiumMotorolaTeledesic

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