TerreStar considers bankruptcy

TerreStar, a satellite mobile network, is currently in talks with creditors regarding a potential bankruptcy filing. Though the company is quite young, they have already accrued over $1 billion in debt.

TerreStar Networks, a subsidiary of TerreStar, has been developing their hybrid mobile coverage. This means that the phone typically relies on regular carriers, but can switch to the satellite when necessary. They currently only have one model on the market: the TerreStar Genus, offered through AT&T.

There have been a couple problems with their business model thus far. First of all, the satellite coverage only covers the continental U.S., Hawaii, Alaska, and Puerto Rico; so this is no substitute for a world phone. Second, the charges for usage on the satellite network are extremely expensive: 65 cents per minute, 40 cents per text, and $5 per MB of data.

Had this been a truly global 3G/satellite hybrid, TerreStar would be more of a player by now. Unfortunately, its paltry network coverage and exorbitant costs make it a narrow niche item at best.

TerreStar is attempting to use another large credit line of $100 million to build a second satellite, presumably to expand their coverage, but it might be too late.

source: The Wall Street Journal