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Metricom leaves $1 billion debt trail

The Ricochet wireless Internet service provider has a $1 billion trail of debt, including $300 million owed to bondholders and hundreds of millions to WorldCom, according to court records.

SAN JOSE, Calif.--The provider of the Ricochet wireless Internet service left a $1 billion trail of debt, including $300 million owed to bondholders and hundreds of millions more to WorldCom, according to court records filed late Monday.

Metricom, which manages the Ricochet mobile Net service, voluntarily filed for Chapter 11 bankruptcy protection Monday. Under Chapter 11, a company continues to operate while it draws up a debt-restructuring plan.

The move did not surprise many wireless industry watchers. Metricom had hinted at its financial woes for months, but U.S. Bankruptcy Court records filed here show for the first time the extent of Metricom's debts.

WorldCom, Metricom's largest creditor, claims it is owed $355 million, according to court records. WorldCom owns an estimated 50 percent of Metricom's preferred stock. The company, which provided circuits for Metricom's wireless Internet service, did not immediately return a phone call for comment.

Metricom also owes more than $300 million to "many" bondholders who bought Metricom issued bonds, according to Paul Silverstein, an attorney representing the bondholders. The money was part of an estimated $500 million in capital that Metricom raised since it was founded in 1985.

Silverstein said he has held negotiations with Metricom for the past six to eight weeks, ever since the company announced it was in serious financial trouble. He said he hopes to reach an "expeditious resolution."

Other creditors include two equipment makers that Metricom used to provide the Ricochet wireless Internet service. Sierra Wireless and Novatel Wireless manufactured the modems and PC cards for the service. Sierra Wireless, a modem maker, said it is owed $29 million, according to the bankruptcy filing.

Novatel, which provided PC cards for the service, said in the filing that it is owed $26 million. The filing did not make any reference to Vulcan Ventures, the venture capital firm backed by Microsoft co-founder Paul Allen that owns about 30 percent of Metricom stock. Vulcan Ventures declined to comment on the Metricom bankruptcy.

Some resellers of the Ricochet service also filed court claims seeking back pay. Juno Online Services, an ISP, said it is owed about $1.3 million and Go America said it is owed $3.5 million.

National Semiconductor, which said it is owed $6 million, was also listed among Metricom's top 20 creditors.

Analysts say the high-priced service, which costs about $75 per month, was a technological marvel, but too expensive to attract anyone other than early adopters and a smattering of businesspeople. About 41,000 customers subscribed to the service.

The company's bankruptcy filing may signal the beginning of six months of consolidation among wireless Internet service providers, according to Bryan Prohm, a wireless industry analyst for Gartner, a market research and consulting firm.

"This is the only logical Darwinian outcome," Prohm said. "For the next six months service and content providers are going to focus on proven business models, rather than leaning on the technology as a crutch, like Metricom."