16 - 22 March 2000

Iridium satellite services to end tomorrow

by David Kelleher

The Iridium global satellite service, provided by Iridium LLC, is expected to stop operating tomorrow pending a bankruptcy court decision after a qualified buyer failed to come forward and provide additional funding.

The company had until yesterday to propose a plan that would save Iridium from closing down and now the ultimate decision as to the future of Iridium LLC and the continued availability of Iridium service now rests with the bankruptcy court.

A statement from Motorola, which has an 18 per cent shareholding in Iridium, said that there may be little, if any, advanced notice before Iridium LLC actually shuts down its system and the service ends. The Malta Business Weekly yesterday tried to contact Massimo Massimi, executive communications director, however all phone numbers were linked to an answering machine. Not even a telephone operator was available, a possible indication that the staff at Iridium Italia had already packed their bags.

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 was given the licence for 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 told The Malta Business Weekly that the local company had no investment interests in Iridium and doubted whether any local people had purchased a satellite set. An Iridium satellite telephone costs between US$3,000 and US$4,000.

"Maltacom has not invested in Iridium although it signed an agreement to provide the services for Iridium Italia. With regards to the licence given by the government, this will be revoked," he said.

According to InterConnect magazine, Motorola said it would give subscribers their money back if the phone was in good condition and bought directly from Motorola.

The demise of Iridium LLC started within months of its launch. As

subscribers failed to reach expected levels, the company's high profile directors began to resign.

By August 1999, there was little hope that Iridium LLC would survive and that same month it filed for Chapter 11 bankruptcy protection. By then Iridium had defaulted on US$1.55bn in bank loans and an estimated 20,000 subscribers. It had expected 600,000 by the end of 1999. Late last year, cellular telephone pioneer Craig McCaw made a US$600m proposal to save Iridium. The offer was made to Iridium's banks, with Motorola planning 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. In turn, 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.

Last month, however, McCaw showed no further interest in the company because of numerous technical problems faced by Iridium in providing a reliable service.

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

In an urgent statement on Motorola's website, subscribers and investors were informed of the pending suspension of Iridium services and what is expected to happen over the coming days. "Motorola and other Iridium investors have been working very hard to support Iridium LLC's efforts to reorganise and continue operating the business.

"At this point, it is really is too early to say for certain what will happen to the satellites. They do not belong to Motorola, and like Iridium LLC's other assets, what happens to them is up to the bankruptcy court. Motorola could be asked (by the court) to begin the process of decommissioning the satellites on behalf of Iridium LLC," Motorola said.

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.