The satellite communication infrastructure established by Motorola with an investment of 5.5 billion dollars, was sold for 25 million dollars, and continues to operate. The project provides services to the US Department of Defense, and offers to help competitors from yesterday - the cellular companies
Rumors of the death of the Iridium satellite phone project were premature. A debt of 5.5 billion dollars disappeared with the announcement of bankruptcy, and the new Iridium was launched, according to the post-New Economy model: bankruptcies and settlements with creditors cleared the company of its huge debts, and under new ownership it is starting a new path with zero capital costs, large assets of Losses for tax purposes, and sometimes even operating profit, which is actually net profit.
The Motorola company initiated and invested with its partners more than 5 billion dollars in the ambitious project. 66 satellites were launched into space and allowed anyone with a satellite phone to make and receive calls from any point on Earth. For several years, the impression was received that the satellite phone is a permanent solution to the problem of mobile communication.
But at the end of 2000 and in the midst of the communications crisis, it seemed that the dream had come to an end: several tens of thousands of subscribers who invested in the relatively expensive phone justified the investments. The proliferation of terrestrial cellular systems has made it possible for subscribers to receive mobile phone service in almost any populated place. Iridium's clientele was reduced to fans of technological innovations,
Travelers heading to exotic places, adventurers and seafarers. The price of the device reached $3,000, and the minute of use cost $13-7.
Bin Laden advertises Iridium
The most famous customer of the satellite phone was the terrorist Osama bin Laden, who prefers to live in sparsely populated areas. The publication of the photo of bin Laden equipped with the long-antenna device greatly upset Iridium's PR people. One of the company's largest customers, if not the largest, is the US Department of Defense, which pays the company $76 million per year for 20 devices used by its personnel.
Iridium was the most famous of the satellite phone companies, but not the only one that was founded and ran into trouble. Next to it, an ICO company that went bankrupt also failed, and today the Globalstar company is on the verge of collapse with 40 thousand users. According to estimates, the company will go to court to receive protection from its creditors (Chapter 11) in the coming weeks.
With the bankruptcy of Iridium, estimates prevailed in the communications industry that Motorola will now have to destroy the dozens of satellites it launched into space. But surprisingly, it turned out that there are entities interested in purchasing Iridium. In March, Iridium was sold for $25 million to a consortium of 4 telecommunications companies, led by Dan Colassi, formerly CEO of aviation equipment manufacturer UNC and currently chairman and CEO of Iridium. In May, the service was relaunched without a noisy advertising campaign in the US. It was good timing.
The terrorist attacks reminded the world of the device's existence
The September attacks in the USA reminded many of the existence of the miraculous satellite device, which can continue to operate even in a disaster zone. When the towers collapsed in New York, the cellular systems malfunctioned as a result of damage to the antennas that were stationed in the trade center area. Even if the antennas were not damaged, the systems would collapse due to the sudden increase in the number of callers.
A satellite phone could have solved at least part of the problem. Iridium marketers reported after the attack a revival in demand for the devices, and also in their use. Now that they are exempt from the main cost of the project, the cost of capital, the new marketers rush to the horizon, and manage to profit from the provision of unique services on an infrastructure sold at zero price.
Recently, Iridium began to offer SMS services and even monitoring applications: a measuring device connected to the satellite phone can enable automatic reporting on the condition of ships wandering in the middle of the sea or on the operation of oil pumps and gas and oil transportation facilities, which are placed in remote areas.
But the real problem will begin in about a decade, when the lifetime of the array of satellites, which were launched in the early 90s, will end. Iridium operators estimate that only about 65 subscribers will bring the company to operational balance. But even double or triple the number of subscribers will not allow it to raise the billions of dollars required to renew the satellite array. Because, within 10 years they are expected to go out of use, due to the emptying of the fuel tanks responsible for keeping them in orbit. There is a slight possibility for the continuation of the service, if in the next decade there will be a sharp reduction in the cost of manufacturing and placing the satellites in space.
Two weeks ago, the CEO of Quadrant Australia, Carlton Jennings, one of the four companies that purchased the marketing rights of Iridium services, had the opportunity to visit New York. In an interview with the CNET website, Jennings confirmed that the September 11 attacks resulted in a sharp increase in device sales, although the jump was temporary. However, the service providers measured an increase in the use of satellite devices, and the level of use still remains high. "The people saw the value of an alternative communication network and they continue to use it," he said.
Jennings does not believe that the service will die out with the end of the life of the satellites, and hopes that the technological development of the systems will create a demand that will allow the existence of the system in the future as well. Just as the development of satellite television systems inherited the failed systems of HBO, the satellite television service that prevailed in the US two decades ago.
In his opinion, one of Iridium's greatest hopes is the data communication service, which enables monitoring and tracking of facilities operating in remote areas. "The old Iridium was based on services for passengers around the world. This is not a market. It's not exist. The new Iridium focuses on people who need communication in places where there is no communication infrastructure."
Although Iridium is beginning to operate data communication services, it will not be able to compete with the land mobile operators in the field of broadband Internet, releases 2.5 and .3 nor will it try, according to Jenning, but will rely on its unique advantage, communication everywhere.
One of Iridium's main marketing targets is the cellular service operators. Iridium offers mobile operators to combine its services with the terrestrial operator's service and turn itself into a service provider everywhere. A terrestrial Internet user receives excellent service wherever there is an antenna. But if his car breaks down where there are no antennas, broadband internet services won't help him. Integration between us and the terrestrial internet company and all to enable him to receive help wherever he is."
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