McCaw pulls out of Iridium: Is satellite provider's end near?

Satellite provider Iridium's days are numbered - literally. On March 3, Eagle River Investment, Craig McCaw's investment firm, said that it would not continue to invest in Iridium.

Eagle River already had given Iridium $5 million, which kept the company running through March 6, and was expected to buy the satellite provider.

Instead Iridium managed to secure an additional $3 million on March 6 from its lenders, which bought it 11 more days of operating cash. But Iridium must find another backer by March 15 or begin implementing a plan to dismantle the satellite constellation, according to a plan approved by the bankruptcy court.

In a statement, Iridium said it is pursuing other potential investors and has received interest from hopeful buyers.

"It could be an elaborate negotiating ploy," said Rob Norcross, vice president of Mercer Management Consulting.

Some industry observers have suggested that Eagle River is threatening to pull out of talks with Iridium in hopes of securing a lower price.

Eagle River, however, said that it decided not to pursue Iridium because the constellation has limited data capabilities. Instead, Eagle River will continue to focus on satellite providers ICO and Teledesic, which have high data capabilities. Previous reports claimed McCaw wanted to combine ICO, Teledesic and Iridium.

Even if Iridium had greater data capabilities, Eagle River may have lost interest. With an original price tag of $5 billion, Iridium would have to earn about $1900 per minute to pay off the system, which has a lifetime of five to seven years, said Larry Swasey, senior wireless analyst with Allied Business Intelligence. "By the time they get Teledesic up and running, this system would be looked at as old and gray."

If Iridium doesn't find a backer and must dismantle the constellation, its license rights would end, and it would likely surrender its license back to the FCC, said an FCC spokesman.