After months of uncertainty peppered with glimpses of hope, Iridium L.L.C. officially settled into its new home last week as a mobile satellite service provider for government and remote commercial operations.
Now called Iridium Satellite L.L.C. and headquartered in Leesburg, Va., the company was purchased for $25 million by Dan Colussy, former president of Pan American World Airways, and several other investors on Nov. 17.
“We’re willing to take on the risk of doing this because obviously we got a very good deal,” Colussy said.
Although it was touch-and-go for awhile, Colussy and his fellow investors beat out dozens of suitors to gain control of the dying company from Motorola Inc. The new owners intend to use the 66-satellite network-once valued at about $5 billion-to provide communication services to world governments and oil, aviation, mining and other such companies that need voice and data service for their employees working in remote locations.
Iridium ceased service to its consumer users when it shut down in March of last year, but the Department of Defense continued to employ the satellites through Iridium’s gateway in Hawaii, and two weeks ago, the Pentagon agreed to pay $36 million per year to Iridium for unlimited use by the DOD.
“We do not see it as a consumer service … this is not a cell-phone system,” said Colussy.
When Iridium shut down, there were approximately 63,000 subscribers-the same number the company predicts it will need to break even. The new Iridium will offer the 30,000 subscribers who have remained on the network special pricing deals, and it will take old phones back and provide upgraded models.
Service to the U.S. government begins immediately, and industrial customers are expected to be added during the first quarter, the company said. Data rates start at 2.4 kilobits per second, but are anticipated to increase to 10 kbps within six months. Iridium also said it might introduce short-burst short message service by the end of next year.
The company’s new-found focus should relieve some of the problems it had in the past, problems that resulted from trying to market the service to a general public that obviously had little need or interest.
At around $1.50 per minute, potential customers will be happy to find Iridium’s rates compete favorably with those of other satellite service providers. However, pricing will not be a major point of contention for the company going forward.
“Overall, our strongest force is not going to be pricing. We’re not going to be engaging in price wars per say because our system is the only system available today that offers truly global coverage,” said Colussy.
Some concerns have been raised as to the longevity of the satellites. One recently fell to earth over the Arctic Ocean, and the rest could fail at any time. Iridium has “firm” plans to launch replacement satellites, said Colussy.
“If we do replenish the spares … we will then have a seven-year life minimum,” he said.
Eight spares are in orbit right now, and seven more will be launched in the next year or so. The first launch is scheduled for June, which will put five more satellites into orbit, and plans are to launch an additional two in March 2002.
Boeing Co. will operate and maintain the satellite constellation, and Motorola has agreed to continue to provide subscriber equipment.
“They’re going to restart their production lines and we have a firm agreement with Motorola on that subject,” said Colussy.
In three to four years, he also said there should be a second-generation system up and running.
