Cellular phone industry magnate and billionaire Craig McCaw will
not invest in Iridium, possibly dashing the financially-strapped
satellite mobile phone service provider's hopes of a rescue.
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
"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
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
"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.