Iridium satellite phone re-launch

How Iridium's phone system works

The satellite-based mobile phone service Iridium is to be re-launched this week.

Emerging from a $5bn bankruptcy, the new company, backed by a group of private investors, expects to go live on Friday.

Every business has its risks, but we think we've got an excellent chance of providing a return for our investors

Dan Colussy
Iridium Satellite

The group, called Iridium Satellite, paid $25m for the original company, saving its network of satellites from being sent out of orbit to burn up in the Earth's atmosphere.

Iridium fell from grace in August 1999 after it could no longer service its substantial debt and fell into Chapter 11 bankruptcy.

The Iridium system relays voice or data to its mobile phones from satellites in the sky.

The service, which was originally envisaged in the late 1980s as an essential tool for globe-trotting executives, did not launch until 1998, by which time much cheaper, terrestrial mobiles provided near universal coverage.

'A good place to start'

The mobile phone company Motorola and other investors spent more than $5bn on developing and launching the service.

The new Iridium will target people in remote settings, such as the maritime industry

"Inheriting a $5bn system for $25m is very good place to start," said Jose del Rosario, an industry analyst at Frost & Sullivan, commenting on the new company.

The new owners of Iridium plan to target the service at industries that operate in remote locations, such as oil rigs and cargo ships.

They have already signed a deal with the US Department of Defense.

Dan Colussy, chief executive of Iridium Satellite, said the new operation needed to achieve 60,000 subscribers to cover its costs.

This is about the same number of customers that the old company had before it went bankrupt. It had needed one million customers to break even.

Investor return

"Every business has its risks, but we think we've got an excellent chance of providing a return for our investors," Mr Colussy told journalists.

The new Iridium expects to charge customers about $1.50 a minute, compared with the $7 a minute charged by the former company.

Handsets will also be less than half the cost of the original Iridium phones, which were $3,500 to buy.

To begin with, the old handsets will continue to work with the new service. Motorola, the former parent of Iridium, will still produce the handsets, although Boeing is now running the system.

Despite its bankruptcy, the new owners decided to keep the name Iridium.

"The Iridium name has incredible brand-name recognition across the globe," said Ginger Washburn, chief marketing officer for Iridium Satellite.

Rival satellites

One of Iridium's main competitors will be satellite phone company Globalstar, which is also struggling to service a pile of debt.

When it launched its service in the US about a year ago, Globalstar started with cheaper calling rates and handsets than the former Iridium.

Nevertheless, the company was forced to halt debt repayments at the start of 2001 to ensure it had enough cash to survive the year.

Globalstar announced its own deal on Tuesday to extend its service coverage to outer space.

The company has developed a new modem for the space agency Nasa to allow a rocket or any other flight vehicle to communicate with ground controllers.

This would avoid the need for the traditional and costly equipment associated with flight missions.

France Telecom, Alcatel and Vodafone are among the co-founders of Globalstar.