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Business Strategy Reviving Iridium V Sarvani The case discusses the problems faced by Iridium after the launch of its mobile satellite services. These problems landed the company in deep financial trouble, hich led Iridium to file for !hapter ""#bankruptcy protection in the $S Bankruptcy !ourt. The case also talks about Dan !olussy%s turnaround strate&ies aimed at resurrectin& the company and the outcome. The brilliance of the technology cannot take precedence over the market case. At the end of the day, if you're spending $5 bn on the technology, there better be a market for it. And if there isn't, there will be great humiliation. - Herschel Shosteck, a Wheaton-based wireless analyst, in March 2000. Iridium failed to match its system to its mission which caused too much pressure on the company to get customers uickly. - Leslie Taylor, a consultant for the satellite industry in Washington, in March 2000. Iridium's Failure In 'u&ust "(((, Iridium ))!" *Iridium+, the orld%s lar&est provider of &lobal mobile satellite voice and data solutions, filed for !hapter "" , bankruptcy protection in the $nited States Bankruptcy !ourt. The ne s did not come as a ma-or surprise to the &lobal telecommunications industry since the company%s financial trouble as ell kno n. It had defaulted on $S .".// bn in bank loans. !onsiderin& the company%s investment loss of $S ./ bn, the bankruptcy court imposed a deadline of 0arch "/, ,111 to either brin& forth a purchaser or to close its operations. In response, Iridium promised that if it couldn%t attract a buyer by / pm that day, it ould proceed ith plans to li2uidate. Despite the company%s best efforts, it as not able to convince any party to support its business and it as forced to file for bankruptcy. 3ollo in& this, many e4ecutives in the top mana&ement cadre resi&ned and its satellite services coverin& an estimated ,1,111 subscribers ere stopped. !ommentin& on the debacle, !OO Randy Brouckman said, 5I am deeply saddened by this outcome. I particularly re&ret the impact this ill have on our customers. Iridium achieved si&nificant milestones, and I ant to thank the more than "61 countries that licensed the service and the distribution partners around the orld ho helped market Iridium.5 ' spokesman for 7lobestar, one of Iridium%s ma-or competitors said, 58e think Iridium could very ell have succeeded. There%s nothin& ron& ith the concept, but ith their e4ecution.5 Industry analysts commented that Iridium%s chances of comin& out of this crisis ere very bleak. 0any of them even stated that Iridium had all the features of a potential failure ri&ht from its inception.

Background Note The idea of Iridium as conceived in "(9: by three en&ineersRay )eopold, ;en <eterson and Bary Berti&er ho ere orkin& for the $S#based electronics ma-or 0otorola. They pioneered the concept of a satellite#based, ireless personal communications net ork that could be accessed from any here on earth. The en&ineers orked hard to brin& to life the concept of satellite telephones. They launched &ate ays= in "(99 to facilitate the proposed Iridium satellites to communicate ith the e4istin& terrestrial telephone systems throu&hout the orld. In "((", 0otorola incorporated Iridium to develop and deploy the satellite net ork system. Besides 0otorola, hich held a ,1."> stake in the venture, some of the other ma-or partners included 7ermany%s ?ebacom ith "1>, ;orea 0obile Telecommunications#@.@>, Sprint !orporation#@.@> and Italy%s STET ith =.9> stakes respectively. In "((,, the $S 7overnment 3ederal !ommunications !ommission *3!!+ issued an e4perimental license to Iridium. In the same year, the 8orld 'dministrative Radio !onference *8'R!+ @ decided to ork to ards establishin& &uidelines to re&ulate orld ide radio spectrum ri&hts and facilitate the buildin& of Iridium systems. In "((,, Iridium also si&ned a $S .=.=: bn contract ith 0otorola for construction, delivery and system development. This made 0otorola, the prime contractor for supplyin& satellites, &ate ays and communication products for Iridium. By the end of "((=, the company had raised $S .911 mn as e2uity. 'fter the second round of e2uity financin& in "((@, Iridium%s capital increased to $S .".6 bn. In "((/, the 3ederal !ommunication Department of the $S 7overnment &ranted an operational license to Iridium. In "((6, 0otorola launched the first Iridium satellite. In the same year, Iridium also entered into a&reements ith various mobile satellite service providers. The a&reements ere e4pected to facilitate their cooperation in the company%s efforts to secure &lobal authoriAations for the use of radio fre2uency spectrum / throu&h Bfre2uency#use plans6%. In the same year, it also mana&ed to secure additional investment of $S .="/ mn, brin&in& the total pro-ect capital to $S .".("/ bn. 0ean hile, it also arran&ed for a credit of $S .:/1 mn from BC8 and !hase banks. The company appointed Ed ard 3 Staiano as !EO and ?ice#!hairman. By "((:, Iridium launched @( of the proposed 66 satellites successfully into the orbit. The same year, the company entered into strate&ic a&reements ith ;yocera to develop and market its ireless phones and ith 'lliedSi&nal to develop ireless telecommunication products for aircraft passen&ers and the cre . In the same year, Iridium came out ith its I<O *Initial <ublic Offerin&+ of .,@1 mn and obtained .911 mn in debt financin&. In "((9, Iridium selected Sprint Telecenters : to mana&e its &lobal customer care centers. The company also obtained an additional $S .=/1 mn by issuin& hi&h yield bonds. 'll the 66 satellites ere successfully launched by Dovember "((9 and Iridium then launched its &lobal satellite phone pa&in& services. In "(((, Staiano resi&ned and Eohn Richardson, the then !EO of Iridium 'frica !orporation, as appointed the ne !EO and ?ice#!hairman. Iridium%s venture into the upcomin& 0obile Satellite Services *0SS+ market marked a ne be&innin& in the field of personal communications. In the late "((1s, analysts e4pected 0SS to &ro si&nificantly over the ne4t fe years. Thus, the company%s pathbreakin& services ere bein& heralded as the technolo&y that ould chan&e the face of the &lobal telecommunications industry. About Satellite ele!"ones

Satellite telephone systems ork on the concept of ireless technolo&y that uses individual radio fre2uencies to make and receive calls. These radio fre2uencies are used over and over a&ain by dividin& a service area into different &eo&raphic

Aones called Bcells,% ith each cell havin& its o n transmitterFreceiver antenna. These cells could be as small as a buildin& or as bi& as /1 km across. 8hen a customer makes a call on a ireless phone, the messa&e is transmitted by lo ener&y radio si&nals to the nearest antenna site, hich is connected, to the local terrestrial phone net orks. These messa&es are delivered to the receiver via phone lines if the call is made to a landline phone and by radio si&nals if the call is made to a ireless phone. 8henever a ireless phone user reaches the boundary of a cell, the ireless net ork immediately senses that the si&nal is &ettin& eak and automatically passes the call to the antenna of the cell into hich the caller is travellin&. !ustomers can makeFreceive calls even hen they are out of the accessible &eo&raphical area ith the help of a ireless carrier. This facility is also kno n as roamin&. The services that make use of ireless telephone technolo&y areG

Advanced #obile $"one Service %A#$S&' It is a cellular standard that transmits voice as 30 radio si&nals. It is the most idely used system in the $S. (ode )ivision #ulti!le Access %()#A&' It is also kno n as the spread spectrum technolo&y. !D0' uses a lo #po er si&nal that is spread across a ide band idth. Each phone call is assi&ned a code, hich identifies it to the correct receivin& phone. ' lar&e number of calls can be carried simultaneously on the same &roup of channels, by makin& use of the identifyin& code and a lo #po er si&nal. ime )ivision #ulti!le Access % )#A&' TD0' is a di&ital air interface technolo&y desi&ned to increase channel capacity by enablin& it to handle simultaneous phone calls. $sin& TD0', a si&nal is divided into pieces and each one is assi&ned to a different time *fraction of a second+ slot. This increases channel capacity. *lobal System +or #obile (ommunications %*S#&' This is a type of TD0' that has encryption9 features. 7S0 has become a standard in Europe and the $S for mobile communications. $ersonal (ommunications Service %$(S&' It is a completely di&ital, t o# ay, ireless telecommunications system specifically desi&ned for the $S metropolitan areas. <!S net orks are !D0', TD0' and 7lobal System for 0obile communications *7S0+. Satellite telephones are another kind of ireless telephone services that communicate via satellites circlin& the earth. There are t o types of satellitesG *eoSync"ronous Satellites' These satellites, located ,,,=11 miles above the earth, revolve round the earth every ,@ hours and hence they appear stationary. T o fre2uency bands are used, one each for uplinkin& and do nlinkin&. Such satellite systems are e4cellent for data transmission, but not very &ood for voice communications. This is because of the distance involved and the time taken for electrical si&nals to make one Earth#Satellite#Earth round trip. Because of the lon& time taken to send and receive si&nals, voice communications are usually not carried via 7eoSynchronous satellites. ,o- .art" /rbit %,./& Satellites' )EO satellites communicate directly ith handheld telephones on earth. They are stationed as lo as (11 miles above the earth%s atmosphere. The communications e2uipment on a satellite catches the call from earth and passes it to an earth#based s itchin& system. Due to the hi&h speed, at hich the satellite revolves, it is necessary to hand off a particular call to another satellite that is -ust risin& over the horiAon. The process is similar to that of a cellular system, e4cept in this case the cell site moves rather not the subscriber.

The demand for ireless cellular services has increased considerably from a mere "1 million subscribers in "(9( to around /,1 million in ,11". Het, usin& a ireless cellular service as not very convenient to people ho ere al ays travellin&. They could not make calls to their desired places once they ere out of their home net ork. 'lso, makin& calls toFfrom places, follo in& different cellular standards or fre2uencies as not possible. 0oreover, the cost for makin& international calls as hi&h and 7S0 users had to use only 7S0 compatible handsets that orked out

rather e4pensive because of hi&h rental and call char&es. Iere, 0SS came to the rescue of those customers ho re2uired a telephone service that could be used any here in the orld. The market for 0SS has increased steadily in the last couple of years. 8ith 0SS, customers did not have to take different connections at different locations and chan&e their handsets from country to country. 'ccordin& to a study,( the number of 0SS subscribers as pro-ected to increase from 1./ million in "((( to 9 million by the end of ,11,. 'lso, the revenues from the business ere e4pected to increase from .@ bn in "((( to ."( bn by the end of ,11,. Subscriber base for other services like data and pa&in& as also e4pected to increase and their revenues ere e4pected to reach around ., bn by ,11, from .,/1 mn in "(((. 0any players includin& 7lobalstar, Odyssey, and Inmarsat#<FI!O entered the 0SS market seein& the stron& &ro th potential *Refer E4hibit I+. These companies employed different technolo&ies like )EO, 0EO and 7eoSynchronous satellites to deliver 0SS services to customers. The Iridium system used a constellation of 66 )EOs *See E4hibit II for a detailed description of the orkin& of Iridium%s satellite system+. Io ever, the success of satellite telephone systems as dependent on a host of factors such asG

!ompetition from other forms of service !ustomer demand !ost and financin& The ability of companies to capture different se&ments of the market 'ccess to critical forei&n markets The success of these innovative ne technolo&ies in the lon& run.

"e Iridium Venture Iridium had invested lot of money in RJD, buildin&, deployin& and maintenance of its satellite constellation. Thou&h 0otorola realiAed the fact that the venture ould involve substantial time and cost outlays and as very risky, it as perturbed hen the venture consumed more time and money than e4pected. By "(((, Iridium found itself in deep financial trouble ith a hu&e amount of outstandin& debt to be repaid to its bankers and creditors. !hase 0anhattan, Iridium%s lenders had already &iven three e4tensions for repayment of loans by 'u&ust "(((. 'nalysts remarked that the company%s troubles ere not due to the concept of satellite telephones, but due to its faulty strate&ies. Iridium had to spend a couple of million dollars every month -ust to maintain its infrastructure. In addition to the 66 satellites bein& used, Iridium as incurrin& heavy e4penditure to maintain the spare satellites as ell *to be launched in case any of the 66 satellites failed+. 0oreover, the company planned to offer its services to a broad customer base so as to make the business viable. The company needed at least a million subscribers to &et close to the break#even point. This necessitated the maintenance of a doAen &ate ays, makin& the infrastructure involved very comple4. 3rom the very be&innin&, Iridium faced problems in buildin& up a siAeable subscriber base. Iridium tar&eted &lobal business travelers and certain hi&h#end customers. But this market as not lar&e enou&h. !onse2uently, in "(((, it had only ,1,111 subscribers as a&ainst an estimated 61,111. !ustomers ere not interested in usin& Iridium%s services for various reasons. 3irst, Iridium%s subscribers had to essentially buy the specially desi&ned 0otorola handsets. They could not use any other handset. !onsumers used to sleek and cheaper handsets ere not happy ith the bulky handsets that ei&hed almost a k&"1. They ere not only difficult to carry around but a k ard to use as ell. Second, handsets ere also priced on the hi&her side at about $S .,/11 to $S .=111, hich as as a ma-or deterrent. To attract customers, Iridium reduced the price to ."111. In September "(((, Iridium%s main competitor, 7lobalstar launched its satellite

telephone services ith handsets initially priced at ."111 and later reduced to .:11. This added to Iridium%s problems. Iridium%s initial service char&es ere .: per minute, hich as later reduced to ., to .@ per minute dependin& on the location *dependin& on the country they ere used in # for e4ample, in Eapan, users paid an initial fee of .:: and a monthly char&e of ./1, plus actual call char&es that ran&ed from .,.6: per minute to .6./( per minute+. To address the criticisms of hi&h service char&es, Iridium slashed its call rates to ."./1# ,./1 per minute for domestic phone calls, and .= per minute for international calls in Eune "(((. Io ever, these char&es ere still very hi&her than those for telephone calls made usin& terrestrial or cellular net orks, hich orked out to less than a dollar. To add to the company%s problems, 7lobalstar priced its service char&es on the lo er side from := cents to .=, dependin& on the location. Iridium faced another setback hen it encountered technical problems durin& the launch of its services to customers. These problems ere not limited to once but several times. The company also faced delays in deliverin& handsets to its customers. !ustomers could not &et the services accordin& to the schedules announced by the company. The service costs and handsets ere not the only problems. There ere many technical &litches as ell. The company%s phones did not ork indoors, because they could not catch the si&nals relayed by the satellites. This inconvenienced the users ho had to &o outdoors to ans er an incomin& call. 0oreover, Iridium did not offer any data services"" initially. 'll the above factors landed the company into deep financial problems. In the fourth 2uarter of "((9, Iridium posted a loss of .@@1 mn and in the first 2uarter of "(((, Iridium reported a hi&her net loss of ./1/ mn on revenues of only .".@/ mn. The company could si&nup only "1,,(@ customers as a&ainst a pro-ection of /:,111, as stipulated in the terms of the .911 mn loan taken by the company. The company%s sorry state of affairs prompted some of its ma-or investors to file an involuntary !hapter "" petition a&ainst it. Iridium%s strate&ic partners be&an discussions to ork out a financial restructurin& plan for the company. Io ever, they ere not able to reach a consensus. !ommentin& on this development, a member of the Steerin& !ommittee ", that o ned about ,/> of Iridium%s .".@/ bn in outstandin& debt said, 5Despite the best efforts of the parties involved, consensual a&reement could not be reached on a restructurin& plan. It became clear to the various parties at interest that a !hapter "" filin& as inevitable and unless drastic action as taken, the company%s assets could be at serious risk.5 The company asked its key partners for investments but it did not &et any positive replies. Even 0otorola refused to invest more money into the failin& company. Io ever, it a&reed to provide full operational support and a si&nificant amount of technical, sales and marketin& support. The company decided to file for !hapter "" bankruptcy in 'u&ust "(((. Iridium also tried to look for some outside buyers, but a&ain in vain. Thou&h !rai& 0c!a "= initially sho ed some interest, eventually he ended up buyin& one of Iridium%s competitors, I!O 7lobal !ommunications, hich as also bankrupt. 8ith even the last bidder turnin& a ay, Iridium had no other option but to decommission its net ork of )EOs and stop offerin& its services. Resurrecting Iridium Thin&s chan&ed dramatically for Iridium in late ,111 hen Dan !olussy, "@ came to the rescue of the company. Ie formed Iridium Satellite ))! *Iridium Satellite+ and made a bid of .,/ mn, out of hich .6./ mn as paid in cash, to ac2uire Iridium%s business. This included purchasin& all of Iridium%s e4istin& assets, its satellites and the satellite control net ork. In Dovember ,111, the $S Bankruptcy !ourt for the Southern District of De Hork approved Iridium Satellite%s bid to purchase

Iridium%s operatin& assets. 3ollo in& this, !olussy took many constructive steps to ards positionin& Iridium as the best mobile satellite service in the market. Iridium Satellite entered into a contract ith aviation ma-or Boein& to operate and maintain the 66#satellite constellation instead of 0otorola, hich no only provided subscriber e2uipment. Ie then introduced closely monitored plans to ensure a successful relaunch of Iridium%s services. Iavin& learnt its lessons the hard ay, Iridium Satellite as careful not to repeat its mistakes Iridium had committed earlier. Since Iridium as bou&ht only for .,/ mn as compared to the ./ mn spent to create it, the ne mana&ement as not under severe cost pressures. Iridium Satellite decided to make its satellite communications services affordable to customers and refocused on its tar&et customer base. It decided to tar&et all those industry se&ments that had a particular need for satellite communications like the &overnment, military, humanitarians, heavy industry, maritime, aviation and adventure. 'lon& ith voice communications, Iridium also launched a series of data services, Simple 0essa&in& Service *S0S+ and pa&in& services for its customers. The company started offerin& several value#added features that includeG 3lat rates for calls fromFto any here in the orld

$nlike cellular services here customers had to use different phone numbers for different locations, Iridium proposed to &ive its customers the facility of usin& only one phone number orld ide Introduction of SI0 cards"/ and a host of other Internet#enabled features. In December ,111, Iridium Satellite &ot the much needed boost hen the $S Department of Defense *DoD+, a arded a .:, mn contract to the company for providin& satellite communications services for the ne4t t o years. By the end of 0arch ,11", Iridium Satellite had relaunched its commercial services. The company also incorporated certain technolo&ical improvements in the satellites and handsets, hich improved 2uality of voice and e2uipment performance. The company%s research sho ed that each satellite could function ell for around seven years. Since many of these satellites had already been in orbit for ,#= years before the launch of the service to customers, they had only @# / years of satellite life left. Io ever, ith the above improvements, the company ensured lon&er life for its satellite constellation. In late ,11", Iridium Satellite also chan&ed the desi&n of its handsets. The company launched handsets ei&hin& less than @11 &rams that ere as li&ht and small as re&ular cellular phones. The cost of calls had also become cheaper than that of calls made on 7S0 mobile phones. Iridium char&ed a flat rate of ."./1Fminute to call any other phone in the orld, ithout any constraint on the duration of the call made. Reportedly, Iridium also claimed to have attained the status of bein& able to provide "11> &lobal covera&e. The company also took steps to enhance its customer service and support by settin& up ,@F:#customer support call centers. This improved its acceptance in the market and enhanced its &ood ill. 8ith all these favorable developments, it seemed that Iridium as resurrected and as on the road to success. The company had come a lon& ay into becomin& the most advanced telephone and pa&in& service till date. The author is !aculty Associate, I"#$. eferences

%. #aini $eva& India's first electric car to be launched this year, www.autoasia.com, #ay ', ())). (. #urali *anaki, +ill $eva ,park a Trend- The .indu /usiness 0ine, *uly 1, ())%. 1. $eva ties up with I"I"I for loans, www.blonnet.com, ,eptember %1, ())%. 2. 3arthasarathy Anand, India's auto industry& how eco4friendly, The .indu, 5ovember 6, ())%. 5. ,rinivasan ,, Indo47.,. venture brings electric cars to India, www.canoe.com, 8ecember %1, ())%. '. $eva 8elu9e displayed at Auto :9po ())(, www.business(media.com, *anuary %5, ())(. ;. Iannacone "ory, Automobile 3ollution's affect on ,ociety and how to fi9 it, www.loyola.edu. 6. <anungo =ushal, "ontrol of vehicular pollution in India& 3erspectives, nistads.res.in. >. India and :uro 5orms, auto.indiamart.com. %). www.revaindia.com. %%. www.mainigroup.com. %(. www.indiainfoline.com. K I!3'I !enter for 0ana&ement Research *I!0R+. 'll Ri&hts Reserved. 3or accessin& and procurin& the case study lo& on to .ecch.cranfield.ac.uk. ))! or )imited )iability !ompany is a hybrid le&al entity that has the characteristics of a corporation and a partnership. 'n ))! provides its o ners ith corporate#like protection a&ainst personal liability, althou&h it is treated as a non# corporate business or&aniAation for ta4 purposes.
"

Often referred to as Bbusiness reor&aniAation,% !hapter "" bankruptcy is one of the most comple4 areas of the $S bankruptcy la . Or&aniAationsFindividuals can file for !hapter "" bankruptcy to deal ith their financial problems of a lar&e ma&nitude. Those ho file for !hapter "" can propose a payment plan and their creditors can vote on this plan. If a stipulated number of creditors vote in favor of the plan, it is approved. Once it is approved, !hapter "" essentially re rites many of the contracts the debtor has ith the creditors and thereafter both parties act accordin& to the ne a&reement.
,

7ate ays interconnect a satellite constellation ith public s itched telephone net orks, thus facilitatin& communication ith handheld phones and any other telephone in the orld.
=

8'R! as held in "((, at Torremolinos, Spain, on behalf of the !ommittee on Radio 'stronomy 3re2uencies *!R'3+. !R'3 orks on behalf of the European Science foundation that is responsible for coordinatin& the use of fre2uency bands so as to keep the fre2uency bands used by astronomers free from interference. It also discusses issues related to the use of radio fre2uencies by different &overnment or&aniAations as ell as corporations.
@ /

It is considered a national asset and a scarce resource that had to be used

keepin& in mind the best interests of all those or&aniAations that use it. The plan made for radio fre2uency bands and services in use or intended to be used in a particular fre2uency band.
6

Sprint is a &lobal communications company, hich provides outsourced call center services for many !ortune 5)) companies and multinational firms. It is the leader in advanced data communications services and also one of the orld%s lar&est carriers of Internet traffic. Sprint entered into a lon&#term multi#million dollar contract ith Iridium for mana&in& the ,@#hour customer service centers named Iridium 7lobal !ustomer !are !enters.
:

Encryption is one ay of ensurin& data security. To read an encrypted file, a user must have access to a secret key or pass ord that enables him to decrypt it.
9

)eslie ' Tailor of )eslie Tailor 'ssociates conducted a study on 0arket Demand for 0obile Satellite Services, Satellite Statistics in "(((.
(

The more popular cellular phones ei&hed less than "11 &rams as compared to the heavy satellite phones and ere small enou&h to fit in the customer%s pockets.
"1

3acilities to connect to the Internet or a corporate net ork ith the help of a satellite phone from any here on earth. $sin& this, the customer can bro se the 8eb, sendF receive e#mail and transfer files.
""

Iridium%s ma-or investors formed a steerin& committee called the BInformal !ommittee of the Iolders of the Senior Dotes of Iridium.% 0embers of this committee ere called the members of steerin& committee.
",

' pioneer in the cellular telephone industry and a leadin& name in the &lobal ireless communications industry. Ie as the !hairman and !o#!EO of Teledesic, the leadin& $S based telecommunications company. Ie initially made a .:/ mn offer to buy Iridium but later backed off.
"=

'n aviation industry businessman ho had previously served as !hairman, <resident and !EO of the $S based aviation ma-or $D! Inc.L !hairman, <resident and !EO of !anadian <acific 'irlines and <resident and !OO of <an 'merican 8orld 'ir ays.
"@

Subscriber Identification 0odule *SI0+ card is a Bsmart% card that allo s users to make and receive calls. The SI0 card identifies the user to the net ork and contains a microprocessor chip, hich stores uni2ue information about the user account, includin& his phone number and security number. SI0 cards have many functions like providin& memory space to save up to "11 names, phone numbers and "/ short te4t messa&es *S0S+.
"/

Exhibit I: Players in the MSS Market Name of System/ Application Iri ium Major Investors Number of Satellites Estimate !ost "ear of of #peration Project/Service

Motorola, Raytheon, ## (low- %& $n Septem$er Lockheed Martin, earth or$it" Handset' %!,(((- //0 Sprint, Khrunichev %),((( Hand-held dual-mode State Research ( ! *harges' %).((phones, paging, lowsmall investors". %&.((+min. speed data transmission. (retail" ,ccess -ee' .aries $y country. $lobal Star Hand-held dual-mode Loral Space 1 *ommunications, 2ualcomm 3nc., 40 (low- %!.# $n earth or$it" Handset' %5&( *harges' (.)&,ugust //0 (partial",

phones, -i6ed ordinary phones, paging, low speed data transmission Ico $lobal !ommunications

,ir7ouch *ommunications and others.

(.&& cents+min. (wholesale" /// (-ull" ,ccess -ee' Service providers set the -ees. !((( (3*8 was e6ecuted to launch its -irst satellite $y the end o//0."

3*8 is a London! %4.& $n $ased private (medium Handset' % ,((( o--shoot oearth or$it" *harges' % .(( 39M,RS,7. 45 %).&(+min. Hand-held dual-mode investors including (retail" mo$ile phones, phones *8MS,7, 7R: and ,ccess -ee' -or cars, ships, aircra-t, Hughes. .aries $y -i6ed phones in country. developing areas. Ellipso Hand-held phones -or mo$ile and -i6ed uses. :ill use smaller satellites in highly inclined and e;uatorial or$its to provide low-cost service. E!!#

Mo$ile Holdings % . $n !((( *ommunications 3nc. Handset' % ,((( 5 (low- *harges' (.&( (<oeing, Spectrum earth or$it" cents+minute ,stro, Lockheed Martin, 3srael ,ircra-t ,ccess -ee' 3ndustries, .ula %)&+month *ommunications, and Harris *orp."

*onstellations ! (low- % .! $n !(( Hand-held phone -or *ommunications earth or$it" Handset' %5&(mo$ile and -i6ed uses. (8r$ital Sciences, % ,((( =ocus on providing <ell ,tlantic, *harges' (.#(@ telecom coverage in Raytheon ?-Systems, (./( cents +min. e;uatorial countries such Space .est, Matra ,ccess -ee' %!(as 3ndonesia and <ra>il, marconi" %4(+month with remote villages and low-density populations spread throughout vast geographic areas. Source' 8--ice o- 7elecommunications, AS Bepartment o- *ommerce, Culy 5, //0.

Exhibit II: Iri ium%s Satellite System !onfi&uration !omponents 'escription :ith ## satellites -orming a cross-linked grid a$ove the earth, the 3ridium system is a low-earth or$it -or a wireless telephone service. Cust a$out 5(( km (40( miles" high, these satellites work di--erent than those at a di--erent or$it ()#,(((km" in two maDor ways. 7hey are close enough to receive the signals o- a hand-held device and second they act like cellular towers in the sky where wireless signals can move overhead instead o- through ground-$ased cells. 3ridium aeronautical services provide essential voice -acsimile and data services to travelers on commercial, $usiness, and general aviation aircra-t. *ompact, lightweight 3ridium units are designed to compliment e6isting aeronautical communications, o--ering passengers and crew convenient glo$al access to telecommunications. Eocketsi>e 3ridium pagers are capa$le o- receiving alphanumeric messages. =or worldwide applica$ility, the message display will -eature an international character set. ,n o---the-shel- disposa$le $attery will provide an average li-etime o- one month. 7he 3ridium phone is the primary means $y which the caller will communicate directly through the 3ridium network. 8ne telephone num$er with the use o- a mini-su$scri$er module (S3M" keeps the su$scri$er connected. 3ridium gateways connect the 3ridium constellations with pu$lic switched telephone networks, making communications possi$le $etween 3ridium phones and any other telephone in the world. , person who has signed -or the 3ridium services.

3ridium Satellites

,eronautical

3ridium Eager

3ridium 7elephone

3ridium Fateway :ireless *ustomer

7errestrial :ireless Switch :ireless 8perator

3ridium Fateways interconnect the 3ridium constellation with pu$lic switched telephone networks, making communications possi$le $etween 3ridium phones and any other telephone in the world. G Source'www.iridium.com.

K I!3'I <ress. 'll Ri&hts Reserved. Reference M "@#1=#16#1, (ase Analysis ' Strate&y G E4ecution 3ailure - !i"#ot Singh !larity of business vision is essential for the success of any company. In the mobile satellite services industry as ell, here companies seek to create a borderless orld for consumers, it is very important to adopt a clearly defined business vision. The philosophy behind a venture like Iridium seems to be Bprovidin& convenience of personal communications%. Do , as the company able to achieve or fulfill the above dreamN The ans er lies in the follo in& table, hich lists the differentiatin& features of satellite telephony over e4istin& communication services on the basis of various parametersG $arameters 0 Iridium's Scores 7lobal covera&e # / The consumer#end facilities *that is, the handset+ # = !ost component of the service # , <ayment mode and channels # , Ouality of service, technical and customer relation mana&ement issues # = !onsumer base # , Economies of scale and scope bein& available for the service provider # , Eust#in#time service provision 2uality. # = 0inimiAin& frontier transition in net orkin& and in operational costs # , 's the above analysis sho s, on a scale of "#/, Iridium scores rather lo on most of the parametersP The reasons for the company%s failure durin& the first phase of its launch despite substantial support from banks, creditors and suppliers are manifold. They can be summariAed as follo sG The company had the vision of a satellite#based, ireless, personal communications net ork that could be accessed from any here in the orld. Thou&h Iridium e4celled in terms of the broad technical innovation issues, the

company missed out on the marketin& innovation front. The failure lay in its inability to transform technical brilliance into a marketable service. On revisitin& the trail of pro&ress and failure of the venture, it is clear that the company had not properly identified the user se&ment and the cost#value relationships. Settin& up the Iridium business as an e4cessively capital intensive task # hu&e e4penditure *to the tune of a couple of million dollars every month+ had to be incurred in maintainin& and runnin& the satellite infrastructure. This proved to be a ma-or problem since the company needed at least a million subscribers -ust to break even. This in turn, necessitated the maintenance of a doAen &ate ays, makin& the infrastructure involved very comple4. The financin& options of the company too fell short of the estimated returns as the subscriber base turned out to be e4tremely lo as compared to the pro-ections. 's a&ainst the re2uirement of a million subscribers, the "((( subscriber base as -ust ,1,111P The reason for poor customer response as that Iridium had failed badly on the service efficiency aspect. In response to the competitive pressures intensifyin&, the company had to bear further costs to support its business promotion efforts. The impact of the above factors as that by the first 2uarter of "(((, Iridium posted a loss of about ./1/ mn, about /11 times the revenue billin&s. 7iven the above problems, the bankruptcy as not a very surprisin& development.

Speakin& of Iridium%s revival, Dan !olussy%s most remarkable initiative seems to be in terms of transformin& the business focus to one of Bconvenience%, tar&eted at all mobile telecommunication service users. The turnaround of Iridium as thus built alon& the follo in& issuesG 3lat call rates ' sin&le phone number for Internet enabled features Data services provision 0arket se&mentation, in terms of, dedicated and or&aniAed customer clusters *for instance, &overnment, defense and humanitarians+ Improved 2uality of service *technical as ell as operational+. orld ide accessibility

To survive and sustain itself in the future, Iridium could e4plore the possibility of tappin& ne revenue streams # perhaps, it could think of leasin& its massive infrastructure for transmission purposes to other telephony service providers. If this sort of a deal could be made possible technolo&ically, other industries availin& such transmission facilities mi&ht become a ne source of revenues for the company. 7oin& back to the ar&ument put forth at the be&innin&, it cannot be denied that Iridium%s technolo&ical breakthrou&h still is a revolutionary concept. The bi&&est problem, as e have seen, as the lack of proper strate&y e4ecution, especially ith respect to the marketability of the service. This problem seems to have attracted the attention of Dan !olussy to some e4tent # ho ever, &iven the problems on the infrastructure and competition fronts, the turnaround efforts do not seem to be sufficient. The author is !aculty #ember at I"!AI #eritum "ollege, ?urgaon. (ase Analysis

' Turnaround !andidateN - $rish angara#an

The sa&a of Iridium hi&hli&hts the pli&ht of companies operatin& in industries here Btechnolo&y% is the $S< and here rectifyin& ron& strate&ic moves is almost impossible. The case &ives a lot of insi&hts into the dynamics of the volatile &lobal telecommunications industry. "e Initial Failure The failure of Iridium in the first phase can primarily be attributed to the eak value proposition offered by the company. The decision to adopt a Bhi&h price#lo value% route paved the foundation for Iridium%s failure. The time and cost overrun in the initial phases of its launch further added to the problems. This in turn, resulted in a poor subscriber base, hich -ust as not enou&h to meet the hi&h operatin& and financial costs. Thou&h the firm had initiated strate&ic moves like rationaliAation of services and service char&es, problems ith respect to technolo&y compatibility and handsets ne&ated these efforts. (ritical Success Factors The emer&in& satellite communication landscape differs si&nificantly from the earlier &enerations of telecommunication services. The earlier satellite communication systems offered broadcastin& and interactive services, but ith ma-or limitations. The ne technolo&ies in this industry are tryin& to overcome traditional barriers like e2uipment and service cost and de&ree of mobility. Success in this emer&in& industry ould depend on the follo in& factorsG $ser friendliness of the technolo&y * as a&ainst superior technolo&y+ !ommercialiAation of the technolo&y !ost and sources of finance 'ppropriate selection of tar&et market se&ments Iridium evidently did not address any of these critical success factors satisfactorily and hence its failure should not have come as a ma-or surprise. A S1/ Analysis and Future )irections

The facts of the case and the turnaround adopted by Iridium can be used to conduct a S8OT analysis as follo sG This S8OT analysis su&&ests that the future of the firm depends on the effective handlin& of the technolo&ical chan&es and on streamlinin& its internal operations. In order to survive in the future, the firm should consider the follo in&G E4plorin& the possibilities for effective strate&ic alliances technolo&y suppliers so as to tap the emer&in& markets ith a broad ran&e of

Enterin& into competitive relationships for &ainin& the critical mass <artnerin& ith the &overnment and other research institutions to support research in satellite technolo&y 8orkin& ith end#users to improve standardiAation of services

!lose monitorin& of all the three layers of technolo&y in satellite telecommunication so as to control operatin& and maintenance costs. This also help the firm in the effective utiliAation of satellites. urnaround Strategy

ould

Dan seems to have started orkin& in the ri&ht direction for the firm%s revival. The success of the turnaround efforts at Iridium ould depend upon t o ma-or areas, namely, operations and marketin&. Dan%s choice of Boein& for the Operations and 0aintenance contract ould help the or&aniAation reduce costs si&nificantly. On the marketin& front, the alteration in the value proposition *to match its competitors+ also seems to be a ise move. 3urther, offerin& a plethora of services for various cate&ories of clients ould help Iridium &enerate the much#re2uired revenues. Thus, the differentiation and promotional efforts introduced by Dan, alon& ith the corrective measures on the operations front could enable Iridium to move to ards a turnaround. 0arket assessments for the adoption of advanced telecommunication services are complicated by a number of factors. 'doption of a communication technolo&y is often very limited until some Bcritical mass% of users is reached, at hich point adoption accelerates rapidly. Technolo&y innovators like Iridium often fail to realiAe the fla s in their o n perceptions of the market. They do not foresee secondary or do nstream applications and conse2uences that arise after technolo&y achieves &reater sophistication and idespread adoption. 'lso, there is a tendency to associate a particular technolo&y ith an emer&in& need, hen in fact many alternative technolo&ies may e4ist. 3urther, there is the problem of tryin& to apply past e4perience to future opportunities. The dan&er in this is that the circumstances surroundin& the introduction of a ne technolo&y may not e4actly match those that ere prevalent hen the previous technolo&ies ere introduced. Iridium estimated the likely adoption of 7lobal 0obile <ersonal !ommunication Services *70<!S+ by estimatin& the current Baddressable market% for &lobal roamin& mobile communications and applyin& the &ro th rates of past terrestrial mobile communications to that number. In fact, 70<!S did not achieve those &ro th rates in "((9 and "(((L and in any event, Iridium as unable to capture much of hatever demand that e4isted for 70<!S. 7iven these facts, Iridium should try to rectify its follies # various forecastin& methodolo&ies are available that ould help overcome the above mentioned problems, includin& sophisticated 2uantitative models. 3orecasters should keep in mind, ho ever, that the purpose of a market assessment is to understand the dynamics of the market, not to calculate an e4act estimate of future subscriber base. This means that Iridium%s future strate&ies should be based not on e4act 2uantitative forecasts, but instead on investment decisions that are likely to increase adoption across a ide ran&e of markets. In the end, the t o bi&&est lessons that the Iridium debacle leaves one ith areG Rapid chan&es in technolo&y and markets &ive companies very little time to market their servicesL and, spreadin& the investment risk as ell as infrastructure re2uirements throu&h ider strate&ic alliances should al ays be considered for a venture of this ma&nitude. This ay, firms ould be able to protect themselves a&ainst problems that Iridium had to deal ith. The author is Associate 3rofessor at Indian Institute of !oreign Trade @II!TA. K I!3'I <ress. 'll Ri&hts Reserved. Reference M "@#1=#16#1,