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Big LEO Soap Opera–The Saga Of Iridium Continues And Continues

By | August 24, 2000

      New Iridium Bidders Rise In A Last Ditch Effort To Save The Constellation

      The story is becoming a very familiar one within the satellite industry. Ever since the high-profile bankruptcy of $5 billion Iridium LLC, companies and individuals have stepped in with grand schemes to save the troubled constellation.

      And as each company proffers their plan for the troubled Big LEO, they inevitably come to the same conclusion: There is no viable plan to make a profitable business out of Iridium.

      But that has not stopped people from searching for that plan, the new Holy Grail of the satellite industry.

      …The Latest Crusaders

      In the wake of Castle Harlan Inc.’s withdrawal of its bid to acquire the assets of the company with a resounding statement that “it would be economically inadvisable to move forward with the acquisition of [Iridium’s] assets,” it seemed like that would be it.

      But that has not stopped two more parties from searching for the elusive formula to make Iridium successful.

      The latest bidders include Minneapolis-based IR/Acquisition and California-based Venture Partners Inc., but as we went to press, neither suitor has been acknowledged by Iridium or its primary contractor and shareholder Motorola Inc. [MOT].

      What is interesting in tracking Iridium’s suitors is the amount of money offered for the ailing company. Castle Harlan offered the bargain basement price of $50 million for the $5 billion constellation, but could not find a way to make that profitable.

      The IR/Acquisition offer comes in lower than that. The company is looking to invest $18 million for the assets of Iridium, including the $155 million in remaining cash.

      It should not be a surprise that the offers are coming down in price because it lessens the risk of the suitor, while at the same time making the road to profitability a shorter one.

      “We can return it to profitability,” said Carl George, chairman and CEO of IR/Acquisition and founder of the Minneapolis-based investment firm Capital Growth Partners LLC. “I think that we have soundly addressed the financing issues to return the system to higher and better use.”

      Of course, these thoughts were shared by everyone who has looked at the Iridium system, including its initial designers and backers. But George did not reveal any details on what he sees that others before have not in terms of turning things around.

      George did note, however, that it would take approximately $125 million to revitalize the system. But getting that infusion of cash could prove to be difficult if not impossible, given the state of the Big LEO market and the struggles of Globalstar L.P. [GSTRF], which is why IR/Acquisition is looking for Iridium’s cash as part of the deal.

      Gene Curio, the entrepreneur leading the Venture Partners bid, is equally optimistic that money can be made from Iridium. He revealed a bit of his long-term vision, which follows the current evolutionary path of both Globalstar and ICO in that it will have a data service offering.

      But what is absent from the comments made is what will be different this time. Pursuing data is not a new concept. It is happening in the terrestrial wireless world.

      And while these data services could serve to boost subscriber numbers and minutes-of-use, the question still remains whether it will be enough to bring success. Who knows? Maybe Globalstar has the Holy Grail right now and has not revealed it yet. If that is the case, then Globalstar’s success should in theory breed competition. But if Globalstar fails, it may just be that a successful business plan for a Big LEO is something that people will continue to chase but never actually find.

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