McCaw's investment management group, Eagle River Investments, today announced it has decided against taking a stake in Iridium because the company's technology doesn't lend itself to offering high-speed, or "broadband," Internet and data services.
Iridium representatives declined to comment.
The move raises serious questions about the future of the beleaguered Iridium, which filed for bankruptcy protections last year after its costly service floundered.
"It's clearly not good for Iridium," said Marc Crossman, vice president of research for J.P. Morgan Securities. "It's one step closer to the grave."
Eagle River last month invested nearly $75 million in Iridium, the world's first satellite-based phone company, to keep the company afloat while it sorted out its financial situation. The short-term McCaw investment was expected to sustain Iridium through June and was intended to buy McCaw's group time to examine Iridium's operations.
But two weeks ago McCaw scaled the contribution back to just $5 million. Now Iridium's current financing will expire Monday.
The company has repeatedly received extensions and short-term funding under a financial restructuring plan installed after Iridium defaulted on $1.5 billion in loans. But chief investor Motorola has said it will not continue to pour resources into Iridium unless another significant investor comes aboard, and McCaw, with his stellar track record, appeared to represent Iridium's best hope of a revival.
Separately, Eagle River also invested in ICO Global Communications, a similar London-based satellite voice and data service that also has flirted with bankruptcy.
McCaw was expected to combine portions of the satellite phone services' networks and operations with his satellite Internet company Teledesic, which he formed with Microsoft founder Bill Gates. But after closer inspection of Iridium's network, Eagle River determined that ICO's technology provides better Internet capabilities and that a larger stake in Iridium wasn't necessary. Iridium primarily offers mobile voice and fax services, with slow data capabilities.
"With the powerful influence of the Internet on global communications, we've made a strategic decision to focus our resources and attention on the satellite-based data services that ICO and Teledesic can provide," Eagle River president Dennis Weibling said in a statement.