Tim Furniss/LONDON
Mobile satellite communications company Iridium is striving to put together a financial rescue plan after filing for bankruptcy protection from its creditors on 13 August.
As the Motorola-led company works on the plan, fellow start-up mobile satellite communications (satcom) company ICO Global Communications is feeling the "Iridium effect" as it struggles to raise finance for its system.
Iridium's Chapter 11 filing came two days after it defaulted on repayments on more than $1.5 billion in loans - and pre-empted moves from its own bondholders to seek Chapter 11 protection. Iridium's investors and bondholders are owed $3 billion.
The operator, which has 66 satellites in orbit, is seeking a reduction in the stakes held by its major shareholders, a renegotiation of service contracts, extensions to loan periods and about $500 million in new finance. It aims to have the plan in place by mid-September.
Iridium's problems have raised doubts about the future viability of mobile satellite communications, making it more difficult for other companies to raise funds. ICO has been forced to come up with a new financing proposal following the collapse of its recent rights issue and failure to raise $600 million (Flight International, 11-17 August).
ICO and its major investors are considering a modified financing proposal which would mean a lower minimum investment threshold and "substantial deferrals" of payments to suppliers, having already secured deferrals on earlier payments. The business - which has yet to launch a satellite - has received $3 billion from investors, but needs a further $1.6 billion to begin service before the fourth quarter of 2000.
The new satcom companies seem unlikely to attract the 30-40 million potential subscribers originally identified, partly because the mobile communications market has changed considerably since the early 1990s when the new satellite systems were first envisaged.
Terrestrial cellular coverage has increased dramatically, while Iridium has struggled with cost, poor marketing, high call costs and poor handset design and availability. Iridium had secured just 10,000 customers by the end of April, instead of the 100,000 expected.
The only operator that appears to have escaped the "Iridium effect" at present is Globalstar. The Loral Space and Communications/Qualcomm-led company has $3 billion in financing and a constellation of 36 satellites in place, and plans to go on-line from October.
Source: Flight International
