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Nine-year Iridium bankruptcy saga over for Motorola

By Peter Judge , ZDNet UK on May 26, 2008 

 

Summary

A judge has ruled Motorola does not have to pay damages of US$4 billion over the failure of its Iridium satellite venture.

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A judge has finally ruled that Motorola has nothing to pay over the bankruptcy of its Iridium satellite venture in 1999, described as the biggest project failure in history.

The satellites are still in use, with current owner, Iridium Satellite, claiming to have around 250,000 subscribers. A creditors' committee had been seeking more than US$4 billion in damages against Motorola, which backed the original Iridium plan to cover the globe with 66 satellites providing phone coverage.

Founded in 1992, Iridium launched its service in 1998, but went into Chapter 11 bankruptcy in 1999, unable to sell enough subscriptions to the expensive service, in the face of competition from GSM mobile-phone services.

U.S. bankruptcy judge James Peck approved a deal which requires no money from Motorola, but calls for Iridium Satellite to pay one percent of unsecured claims, up to US$1.6 billion.

The original Iridium network required a million users to break even but, due to its massive costs, it charged higher fees than terrestrial networks, and struggled to reach 55,000 subscribers. Rather than take the satellites, which had cost up to US$5 billion, out of orbit, the liguidators sold them to Iridium Satellite for around US$20 million.

Iridian Satellite completed the network in 2002, gained business from the U.S. military, and claimed 250,000 subscribers in its first-quarter results for 2008.

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