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August 23, 1999
Last week, Iridium LLC filed for bankruptcy-court protection. It came as
no surprise to anyone familiar with the telecommunications industry-even to
people who are not. In the aftermath the question is, what now?
Last month, Iridium announced a restructuring plan in attempt to save the
company from having to file for bankruptcy. In addition to slashing handset
and service prices in half, the company cut its advertising budget
dramatically. According to J. Armand Musey, from Banc of America
Securities, the budget had been slashed to $12 million for 1999, down
from $145 million one year ago. Unfortunately, the effort came a little too
late.
The international business traveler was Iridium?s target market. According
to a report released by Leslie Taylor Associates titled "The Complete
Book on Mobile Satellites: Systems, Services and Markets," Iridium
predicted that 58 percent of their subscriber base would be international
business travelers, totaling approximately 2.3 million by 2003. Almost a
year after Iridium began its service, it has only 20,000 customers.
Iridium still has hope for the project and has reported that services will
continue as normal. Investors admit skepticism is beginning to mount and
not only for the Iridium system. Wall Street investors are scrutinizing
Globalstar, which is about to launch its service. Hopefully, Globalstar?s
more diverse target subscriber market will help the company reach its
subscriber goals.
Copyright ¸ 1999 Phillips International, Inc. |
