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Saturday, 18 March, 2000, 07:53 GMT
Flaming end for satellites
How Iridium's phone system worked
It all seemed such a good idea...
Bankrupt US phone firm Iridium is to send 66 satellites worth $6bn out of orbit to burn up in the Earth's atmosphere.

The satellite phone company ran out of time on Friday in its hopes of finding a rescuer for its ailing business.

Now, after receiving permission from a bankruptcy judge to cut off service to its 55,000 customers, Iridium plans to use $8.3m of its remaining money to start closing its business, including paying severance to employees.

Private satellites
Network of 66 satellites
One of the first and largest commercial ventures
Previously, satellites linked to national security and only owned by national governments
That does not include the estimated $30-$50m it will cost to destroy the satellites.

"De-orbiting" of the $6bn satellite network may begin in the next two weeks.

In the meantime, the satellites will be kept running and a limited phone service will continue in North America and possibly other regions of the world, said Motorola, lead investor in Iridium.

A Motorola spokesman 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.

"We do not have a qualified bid," William Perlstein, a lawyer representing the debt-plagued company, had told the bankruptcy hearing in New York on Friday.

In all, more than 80 parties had been contacted in the futile hunt for new investors, he said.

Cost of network

The firm's ambitious plan was for mobile phones which worked anywhere in the world thanks to its 66 low-orbiting satellites.

But what may have been seen as a great idea in the early 1990s was overtaken by the rapid growth of terrestrial mobile phone networks.

Despite its blue chip list of backers and the elaborate technology expensively installed, the firm failed to pick up enough customers.

Iridium had said that should its assets be liquidated it would send the satellites, now orbiting at altitudes between 700-800km (440-500 miles), plunging into the Earth's atmosphere to disintegrate.

The reason for this action would be the $10m a month cost for maintaining the network.

The decision was welcomed by George Levin, from the US National Research Council, as showing great corporate responsibility.

He told the BBC that burning them up removed waste and freed up orbit space for others.

Iridium, with debts of $4.4bn, filed for bankruptcy under Chapter 11 in August after disclosing it would be unable to meet obligations worth $1.5bn.

Chapter 11 allows an indebted company to retain control of its operations while it restructures and works out arrangements with creditors.

Pentagon customer

Iridium's satellites work in tandem with existing terrestrial cellular networks, but the network has been plagued by technical problems and complaints about high prices.

The consortium headed by Motorola began operating in January 1999 after 10 years of planning, but the idea failed to catch on.

The phones cost as much as $3,000, with connection charges of up to $7 per minute.

By the time the service launched, there were much cheaper ways for people remaining in touch by mobile phone across the world.

One of its few big customers was the Pentagon, which took 800 of the phones able to operate almost anywhere on the planet.

Last ditch hopes fade

Many customers had been lured after prices for calls and phones were cut sharply last summer, but they were too few in number and too late to restore confidence.

Iridium's hopes were not helped as aggressive rival Globalstar began introducing its service in recent months.

Iridium's future looked sealed two weeks ago when wireless phone pioneer Craig McCaw scrapped plans to expand his budding satellite empire with a bailout of the company.

Discussions with possible purchasers for Iridium continued early on Friday, but no big-name corporate saviours came forward.

The only reported bidder was Gene Curcio, owner of Los Angeles-based Crescent Communications, a privately-held telecommunications company.

He had wanted Motorola to continue operating the satellites for at least another two months. But Motorola proved unwilling to keep the satellite network in operation past midnight on Friday.

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See also:

14 Aug 99 | The Company File
Phones firm files for bankruptcy
14 Oct 99 | The Company File
New satellite phone launched
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