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Iridium can't find buyer, seeks to shut satellite-based mobile phone service

By DAVID E. KALISH The Associated Press 3/17/00 8:39 PM

NEW YORK (AP) -- Iridium LLC gave up its search for new backers on Friday, and a bankruptcy judge gave the mobile phone company permission to cut off service to 55,000 customers and destroy its satellites.

"We do not have a qualified bid," William Perlstein, a lawyer representing the debt-plagued company, told U.S. Bankruptcy Judge Arthur Gonzalez at an afternoon hearing in Manhattan. In all, more than 80 parties had been contacted in the futile search for new investors, he explained.

With that, Judge Gonzalez gave Iridium permission to halt service and "de-orbit" its $5 billion constellation of 66 satellites by sending them to burn up in the Earth's atmosphere, a process that may begin in the next two weeks.

But until the de-orbiting plan is finalized, the satellites will be kept running and limited phone service will continue in North America and possibly other regions of the world, said Motorola Corp., the lead investor in Iridium and the operator of the satellites.

Motorola, which is also a partner in the North American service provider, said it will be up to the independent Iridium affiliate for each region to continue to offer temporary service. A Motorola spokesman wouldn't rule out any last-minute rescue by a new investor, but said the decision to keep the service going for now was a courtesy to customers, rather than a sign that Iridium might still be saved.

The court ruling on Friday capped a stunning corporate embarrassment for Motorola and other major companies who funded the often quixotic quest to link up the remotest reaches of Earth with powerful mobile phones.

Iridium's tortured saga began looking hopeless two weeks ago when wireless phone pioneer Craig McCaw scrapped plans to expand his budding satellite empire with a bailout of the company.

While Motorola has said it will shut off the mobile phone service at midnight on Friday, pulling down the satellites is a longer process that may take up to two years, Perlstein said. The satellites would be moved four at a time into a lower orbit, where they would ultimately burn up in the earth's atmosphere, he said.

The judge gave Iridium approval to spend $8.3 million to start closing its business, including paying severance to employees. That doesn't include the estimated $30 million to $50 million it will cost to destroy the satellites and prevent them from crashing into other objects circling the planet.

Iridium filed for bankruptcy court protection from its creditors last August, unable to make payments on some $4.4 billion of debt, but hoping to reorganize and turn profitable.

While Iridium has more than tripled its subscriber base since last summer, the customer count was still well shy of the levels needed to keep the company afloat without another cash infusion from Motorola and its other hesitant backers.

The service, launched in late 1998, stumbled out of the starting gate amid complaints about large clunky phones and prohibitive prices -- as much as $3,000 per phone and up to $7 per minute for calls.

Prices for the phones and calls were cut sharply last summer, but too late to restore customer confidence, especially with an aggressive new rival named Globalstar introducing service in recent months.

"There was a substantial issue as to whether there was a sufficient market for satellite telephone service," said Joseph Bondi, the chief restructuring officer for Iridium said. "It just hasn't been demonstrated there would be sufficient demand."

Despite the continuous uncertainty Iridium customers faced in recent months, some who truly benefitted from the unique service of a satellite telephone network were disappointed by Friday's news.

"We've actually sent the (Iridium) phones with some climbers heading out on a plane tomorrow to Tibet," said Todd Tibbetts, co-founder of, a Web site that provides updates on climbing expeditions up Mount Everest in Nepal and other major peaks around the world. The climbers would use Iridium phones to dictate stories and provide audio clips for the Web site, he said.

"The Iridium phones have been great. The climbers would throw them in their pockets and just take them out and make a call," said Tibbetts. Now they'll have to go back to using two-way radios that are bigger, heavier and less reliable. "We had this glimpse of how things could be when Iridium was running."

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-- Martin Thompson (, March 18, 2000

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