NEW YORK — Another would-be savior is abandoning Iridium LLC in bankruptcy court, raising the possibility again that a $5 billion satellite system for mobile phones will be reduced to ashes in the Earth's atmosphere.
Castle Harlan Inc., the New York investment bank that planned to buy Iridium's assets for just $50 million, said Friday it has decided that the business is too weak to save even at such a bargain-basement price.
"Although Iridium provides a magnificent international point-to-point telephone service, our due diligence and marketing studies were unable to confirm that Iridium would generate even low levels of revenue with a high degree of certainty," Castle Harlan said in statement. "The result is that we must conclude that it would be economically inadvisable to move forward with the acquisition of the company's assets."
Officials at Iridium did not immediately return phone calls seeking comment on the latest developments.
Iridium's lead investor, Motorola, said it now plans to seek clearance at a court hearing scheduled for Monday in New York to proceed with plans to pull the satellites from orbit so they burn up in the atmosphere.
"For the past several months, we've held discussions with numerous parties that have expressed interest in operating the system and none has panned out," said Scott Wyman, a Motorola spokesman. "Unless there's an acceptable proposal to operate the satellite constellation, we intend to finalize plans to decommission the system."
Motorola has quietly kept Iridium's satellites running — providing limited phone service at a cost of millions of dollars per month — in hopes of ducking the apparent death sentence that was handed down in March, when a U.S. bankruptcy judge granted permission for the network to be destroyed.
Washington-based Iridium, which drew only 55,000 subscribers after launching its "anywhere" wireless service in the fall of 1998, filed for bankruptcy protection about a year ago with debts of about $4.4 billion.
Customers were put off at first by calling charges as high as $9 a minute and handsets costing $3,500, as well as inconsistent service. Prices were later slashed, but business never picked up enough to turn the company around.
Castle Harlan first announced its interest in the satellite company back in June, prompting the bankruptcy court to approve a 45-day period for the investment firm to examine Iridium's books more closely.
But just like Craig McCaw, the wireless magnate who briefly planned to bail out Iridium earlier this year, Castle Harlan clearly wasn't pleased with what it discovered.
In allowing Castle Harlan's to consider a bid, the bankruptcy court had also invited competing offers from other parties. It wasn't immediately clear whether any had been submitted in time for this week's deadline.