Pentagon pulls Iridium back from the brink

The US Department of Defence has agreed in principal to take three years of satellite telephone services, 15,000 handsets and gain unlimited usage.

Iridium filed for bankruptcy 15 months ago. Former company president Ed Staino and the former president of Pan American Airlines, Dan Colussy, have won approval to buy the company's assets for $25m. They hope that the Pentagon deal will help them raise another $80m.

Heavily backed by Motorola and aerospace companies, Iridium aimed to be the first global wireless telephone service using 66 low earth satellites. But as its handsets were heavy and the system would not work indoors, it found itself overtaken by mobile phones.

Nigel Deighton, analyst at the Gartner Group, said: "There was huge potential for them, but unfortunately their market disappeared. They didn't adapt their business plan to the reality of the world."

The company has some potential niche markets in mining and the oil industry, but difficulties with similar satellite plans indicate continuing commercial problems.

Iridium's satellites will start to fall out of orbit in about five years' time.