Now the issue is what to do with the existing satellites in orbit. This will involve an additional expense to bring them down in a controlled way so that they burn up in the atmosphere away from populated areas, says Marco Caceres, senior space analyst with the Teal Group consultancy in Fairfax, Va. – the one person who will speak for the record about Iridium. Iridium officials have been exploring the alternative of selling off the crippled satellites, including offers to the U.S. military and even a Middle Eastern group that would use them for distributing Muslim religious messages. Caceres, however, says he doubts these efforts will succeed. U.S. military forces increasingly rely on commercial communications services, as demonstrated in the peacekeeping missions in Bosnia and Kosovo, he notes. The exorbitant operational costs are likely to frighten away other potential buyers.

The company filed for bankruptcy protection last August. Wireless pioneer Craig McCaw recently said he wouldn’t bail out Iridium, dashing hopes that the $5 billion satellite phone venture would rebound. Now, Iridium’s satellites will be left to disintegrate in the atmosphere as they fall from space. That process could take months, said Marco Caceres, a senior space analyst with consultant Teal Group in Fairfax, Va. “This is unprecedented. No one has ever brought down this number of satellites at the peak of their performance times,” he noted. Mr. Caceres said the satellites will have to be maneuvered into lower orbits in small groups so they can burn in the atmosphere. “It will be a gradual process, that’s what adds to the cost,” he said.

Industry observers say there could be more deals in the offing. All eyes are on Globalstar, a $3-billion, 52-satellite system that has reportedly run into trouble obtaining handsets from suppliers. Whether Globalstar is in financial trouble will not be known for sure until next year, when it must report to lenders, but it is being closely watched by the industry. “Globalstar is a test of whether there’s really a market for satellite phones and how big it is,” says Marco Caceres, space analyst at Fairfax, Va.-based Teal Group, “or whether the whole industry is just a mistake.”

Mr. McCaw “is not going to have an easy time raising nine, 10, 20 billion if he focuses on going it alone,” Marco Caceres, senior space analyst with the Teal Group, Fairfax, Va., said. There has been speculation for weeks that Mr. McCaw might take a role in Iridium, because Motorola is the prime contractor and an investor in both projects. But any restructuring of Iridium would be complicated, requiring approval from banks, bondholders and the bankruptcy court. A Motorola spokesman said he knew of no discussions with Teledesic about Iridium and declined to comment further. Mr. Caceres said a partnership between Mr. McCaw and Hughes “seems very rational and makes more economic sense than messing with Iridium.” Hughes is an investor and contractor for ICO, and also plans its own satellite-Internet project, dubbed Spaceway, that is expected to launch in 2002. But it isn’t clear what Hughes would gain from such a deal, since Spaceway is ahead of most competitors. A partnership also could face regulatory hurdles.

Today’s rocket failures and capital flight may subside in time for other projects now being planned. Teledesic, a 288-satellite “Internet in the sky” backed by cell-phone pioneer Craig O. McCaw and Microsoft Corp.’s William H. Gates III, has already raised $1 billion from Motorola Inc., Boeing Co., and other sources to help with its 2003 launch. “Our investors have a long-term perspective,” says a spokesman. But higher launch and insurance costs are throwing Teledesic’s $9 billion budget into doubt. “A more reasonable figure is $15 billion, but they’re not willing to say that yet for fear of scaring off Wall Street,” says Marco Caceres of researcher Teal Group. Teledesic plans eventually to go public.