Iridium Back From Brink, Plans Bulk Deals
The new owners of an nearly scrapped $5.5 billion Irfdium satellite service said they would sell bulk air time that could vastly expand telecommunications in China, Russia, India and elsewhere in the developing world.
Iridium Satellite LLC, an investor group, said it had ''millions of minutes going to waste'' after wrapping up the $25 million purchase of the 66-satellite, low-orbit network in bankruptcy court in Manhattan.
``We don't have a shortage'' of airtime to wholesale at ''extremely competitive'' rates, said Dan Colussy, chairman of the Phoenix-like venture rising from the ashes of perhaps the most spectacular high-tech flop of the 20th century.
The new owners plan to market airtime at less than $1.50 a minute to companies in aviation, maritime services, oil and gas, mining, heavy construction, forestry and emergency services.
This compares with prices as high as $7.00 a minute that helped doom Iridium's former owners, led by Motorola Corp., which built, bankrolled and operated the global satellite telephone system that began service on Nov. 1, 1998.
The old company, Iridium LLC, sank under high operating costs, lower-than-expected demand and the quick spread of ground-based wireless services. Another drag was the original handset, which did not work well indoors, cost as much as $3,000 and was often compared to a brick.
``We're going to be a niche company,'' Colussy said. The new owners have held preliminary talks about bulk deals for Russian, Chinese and Indian domestic service contingent on building new ``gateway'' ground stations in those countries.
Wholesale deals were also in the works with service providers in Southeast Asia, the Middle East, Latin America and Africa, he said.
Aided by the World Bank and others, Africa is considered a big potential market since it was second only to North America in use of the original Iridium, said Herbert Wilkins, president of Syncom Funds, a venture capital firm helping fund the takeover, marketing and updating of the system.
The Defense Department, citing a growing need for secure point-to-point communications anywhere on the globe, stepped in last week to keep the Iridium satellites from being brought back to Earth in flames -- literally.
De-orbiting cast-off hardware is critical to avoid a build-up of debris that could get in the way of working satellites and space missions. Motorola, which spent as much as $10 million a month to run the system, had planned to begin a 14-month phased destruction this month.
Under the Pentagon keystone deal with the new venture, up to 20,000 U.S. government users, including U.S. military forces worldwide, will have unlimited airtime on the network for $3 million a month.
Colussy said similar packages for mixed civilian-military use might be negotiated with other governments. This would move Iridium from its original customer-based service to a commodity-based business.
The new company, based in Leesburg, Va., will operate for less than $7 million a month, free of the old owners' $5 billion debt service, said Colussy, president of Pan American World Airways from 1978 to 1980.
``You can see the tremendous change in fundamentals,'' he said, adding that the new owners planned to launch 12 new satellites by about March 2002 to serve as spares. The new company has contracted with Boeing Co. to operate the network.
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