Iridium skeptical of LV firm’s bid for satellite system

Tuesday, March 21, 2000 | 10:21 a.m.

A Las Vegas company says it has a business proposal to save the Iridium LLC satellite communication system.

Michael John, chairman and chief executive officer of Merit Studios Inc., said in a news release that he has transmitted e-mail to attorneys involved in the Iridium bankruptcy case to open talks on developing a new company to use the satellite system to transmit data packages.

John said Monday he started negotiations to acquire the satellite system from the company, formed by Motorola Corp. to develop voice communications in remote locations of the world with a network of 66 satellites and eight backups.

Merit Studios, John said in the press release, has invented "WormHole Technology" software that can compress data. John says the software works by restructuring huge data files into small sets that can be delivered over the Internet or other communication networks.

He said Merit is close to being able to compress data by a ratio of 40 to 1 and is working to enhance compression to a ratio of 1,000 to 1.

The Merit plan, he said, would salvage the failed venture, recover all losses and turn Iridium into a new company that would make it profitable. John proposes to download data that has been compressed through the satellite system to customers globally.

Using the Internet and the satellite network, John said, it would be possible to distribute news, advertising and warnings worldwide instantly.

John also unveiled a financial plan and would issue stock in the new company. Under the proposal, 30 percent of the stock would go to Iridium creditors, as well as 20 percent of the net profits until all debt was paid off. Iridium stockholders would get 30 percent of the new stock and Merit would get 40 percent.

The Los Angeles Times reported today that Merit is among three companies that made inquiries Monday about acquiring the satellites. Iridium said none of the three bidders delivered an acceptable offer, the Times said.

Other bidders include HotJump, a Washington website that operates lotteries; and Venture Partners Inc., which wants to use the satellites to provide cellular telephone service in Latin America, the Times said.

The system of satellites "is not an asset that you can bid $1 for, because it costs money to operate," Iridium attorney Robert Beury told the Times.

Iridium last week said it had failed to find a qualified buyer and announced plans to shut down the system and eventually destroy the satellites by crashing them into the atmosphere.