Local licence granted to Iridium Italia put on hold pending rescue proposal

by David Kelleher

A licence granted to Iridium Italia last year has been put on hold after the company, which went bankrupt last year, is awaiting approval of a US600m restructuring plan.

In February last year, Censu Galea, Minister for Transport and Communications, had granted a licence to Iridium Italia to provide a Satellite Personal Communications Service. The service was designed to deliver reliable voice, data, paging and facsimile communications all over the planet. Iridium was also to provide these services locally.

Iridium, which is 18 per cent owned by Motorola, was given the licence for a period of seven years, renewable for another seven, subject to the approval of the Telecommunications Regulator.

However, just a few months after the agreement was signed, the company started facing enormous financial difficulties. Washington-based Iridium filed for bankruptcy protection after failing to attract enough subscribers to its 66-satellite global phone network and various high profile directors resigned from the company.

Contacted yesterday, a spokesman for Maltacom said that Iridium had not informed the company of any developments although it was aware of the restructuring proposal.

"As things are at present, Maltacom is waiting, as other countries are, to see whether the restructuring proposal will work," the spokesman said. The licence is still active yet it has been put on hold.

The US$600m proposal is being led by cellular telephone pioneer Craig McCaw. The offer will be made to Iridium's banks. Motorola, which owns about 18 per cent of Iridium, plans to pay the lenders about US$250m in cash and US$50m of Iridium's 10 per cent convertible notes as part of the proposal, investors said.

Iridium's banks would also get three per cent to five per cent of the equity in the restructured company. The buyout would eliminate the interest of common shareholders.

McCaw's bid for Iridium would follow his US$1.2bn investment in November in rival ICO Global Communications Ltd, which also filed for Chapter 11 bankruptcy protection in August.

The founder of the former McCaw Cellular Communications wants to build a satellite network to offer voice, data and Internet services, analysts have said. Iridium representatives declined to comment, while officials at Eagle River Investments, McCaw's private investment company, were not available. Motorola declined to comment about the proposal.

"We have consistently said we would not provide additional funding without the participation of other investors," said Scott Wyman, a Motorola spokesman.

The company, which defaulted on US$1.55bn in bank loans, had an estimated 20,000 subscribers as of August. It had expected 600,000 by the end of the year. Iridium's 14 per cent notes that are due in 2005 almost doubled in price to US$6 per US$1,000 bond, investors said.

The company received US$20m from investors led by Motorola in December to keep it operating until 15 February, the deadline for repaying cash owed to its lenders. McCaw is the largest investor in wireless company Nextel Communications and the founder of Teledesic, a satellite-data network.

Developed by Motorola, the Iridium system consists of 66 low earth-orbiting satellites, two control centres and 11 gateways.

The latter ensure interconnection between the satellite network and the ground-based systems, either fixed or cellular.