Iridium buys time to climb financial mountain

Satellite phone operator Iridium has completed its first phone call from the top of Mount Everest, but the company's escalating financial problems remain a far more daunting obstacle.

Iridium on Friday said it had secured an extra 30 days to meet key terms set by the companies that funded the 66 satellite network, launched last November to give customers a phone signal "anywhere on earth".

Despite massive pre-launch publicity, Iridium was troubled from the outset with technical problems, delaying the service's launch. The company had hoped for around 27,000 customers by the end of May 1999, but subscriber numbers have fallen well short.

Now the company says it will use the extension until 30 June to evaluate alternatives to restructure its indebtedness and reduce financing costs. It will also attempt to gather consensus among its investors and creditors on a plan to restructure the capitalisation of the company.

"This extension allows us to make the important changes in our marketing and distribution strategy, which will help us drive sales," said Iridium's chief executive John Richardson, in a statement. "At the same time we will continue to work with our creditors, Motorola and our other strategic investors to identify the financial strategy required for commercial success."

During its latest financial quarter Iridium announced a loss of $505 million, on revenue of just $1.4 million. Its subscriber base at the end of March totalled just 10,294.

Many shareholders are unhappy and have filed lawsuits against Iridium, saying the company failed to inform them of technical problems when they invested in the project.

Iridium has also been criticised for its high charges - handsets can cost several thousands of dollars - its slow penetration into key markets, like Europe, and the fact that cheaper alternatives are now available for global roaming mobile users.

Meanwhile, Mexican mountaineer Karla Wheelock last week became the first person in the world to make a mobile phone call - using Iridium - from the top of Everest. However, she could be facing a steep phone bill on her return home, having clocked up around 600 minutes of call time during her mission. Calls can cost between $3 and $7 per minute.

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