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Saturday March 18 2:19 AM ET

Iridium Satellite Network to Flame Out

By Jim Wolf

WASHINGTON (Reuters) - Iridium LLC, a bankrupt $5 billion satellite telephone service, entered the history books on Saturday as one of the costliest corporate fiascoes of all time.

The Washington-based company said it was cutting off telephone service to its 55,000 customers as of 11:59 p.m. on Friday, a prelude to court-ordered liquidation.

Iridium's last act will be to ``de-orbit'' -- and ultimately burn up -- its constellation of 66 satellites now 485 miles high, which was the first to make staying connected possible from any spot on Earth. The network has been reported to have cost $5 billion to $7 billion.

By beaming instructions to on-board devices, engineers eventually will tip the craft, one by one, on a path that will send them down in flames. The target will be the ocean -- a spectacle that may be visible from Earth.

Iridium on Friday gave up its hunt for a buyer to rescue it from bankruptcy proceedings.

``No bid was received which was a qualified bid,'' William Perlstein, an attorney representing the debt-plagued firm, told the U.S. bankruptcy court in Manhattan.

Judge Arthur Gonzalez cleared Iridium to spend $8.3 million to start winding up its business while selling remaining Earth-bound assets, including ground stations.

Iridium had been operating under court protection from its creditors since last August, less than a year after its network became operational on Nov. 1, 1998.

The flop reflected a string of badly botched business calculations. For one thing, the company's clunky telephones initially were priced at $3,000 apiece, with calls costing as much as $7 a minute. Not only were the phones as big as bricks, but they did not work indoors.

Wireless Networks Doomed Iridium

Iridium was doomed by the rapid spread of ground-based wireless networks. Such networks now let business travelers, a prime market for the satellite phones, stay connected from most major destinations.

An attorney for telecommunications equipment maker Motorola Corp. (NYSE:MOT - news), which built and operated the satellites, told the court it would begin the de-orbiting process in about a week.

Clearing out the satellites is necessary because keeping them aloft costs large sums of money. Without proper attention, they could interfere with other spacecraft and explode if hit, adding to the human-made debris already cluttering the heavens.

Bringing the satellites back must be coordinated with several U.S. government agencies. Motorola said it would take up to two years to burn up the last of the satellites in the atmosphere.

Motorola, which held 18 percent of Iridium, the largest stake, said it would ``maintain'' the network while the de-orbiting plan was finalized, an apparent reference to steering the satellites away from danger.

``Motorola is extremely disappointed that Iridium LLC has not succeeded in its effort to emerge from voluntary bankruptcy,'' the Schaumburg, Illinois-based company said in a statement.

``Motorola and other Iridium investors have worked very hard to support Iridium LLC's efforts to reorganize and continue operating the business. Unfortunately, that has not happened.''

• Iridium Satellites to Burn in Debacle (March 15)
• Iridium Satellites May Burn in Business Debacle (March 15)