From the June 7, 1999, issue of Wireless Week
Iridium Gears Up For New Strategy
By Monica Alleven
Iridium LLC has until the end of this month to restructure its indebtedness and reduce financing costs under another 30-day waiver granted by its lenders. The company, while denying it's on the brink of bankruptcy, is busy concocting a new marketing strategy and pricing plan that will focus on vertical markets instead of international traveling consumers.
The extension, which is the second this year for the company, should help Iridium as it revamps its marketing strategy. The company also is getting some help from founding partner Motorola Inc., which owns an 18 percent stake in Iridium. Motorola hired about 200 salespeople dedicated to selling Iridium's service in North America, and that staff should be ready for work this month. Motorola also is leveraging its experience with vertical markets in the two-way radio industry and selling Iridium products and services through those channels as well.
Motorola is named in some of the myriad of class-action lawsuits filed against Iridium, at least three more of which were announced last week. The suits allege Iridium didn't disclose the dire state of its business months ago and failed to report hardware and software problems that made its phone service unreliable. Iridium has denied technical problems, blaming its troubles on poor marketing and training, and said it will vigorously defend itself in court.
It was unknown last week how many of the suits name Motorola specifically. A Motorola spokes-man said he was aware of eight suits, but how the suits are consolidated, a typical treatment for class-action complaints, and how vigorously Motorola will fight the suits alongside Iridium was unknown. Motorola already has pledged heavy sums toward Iridium's fight for survival. As of April, Motorola had about $1.6 billion in guarantees tied into Iridium. Any future investments will depend on Iridium's development of a revised business plan and how much the other Iridium partners kick in, the spokesman said.
Motorola's satellite communications division recently realigned resources internally, pulling workers off the Teledesic LLC project, but that was largely unrelated to Iridium, the company said. Motorola is continuing negotiations for a contract with "Internet in the sky" provider Teledesic, but for now, most of the shifted employees are exploring as-yet undisclosed business opportunities, although a small number may be working for Iridium, said Motorola spokesman Robert Edwards.
Meanwhile, Iridium is trying to tackle its confusing array of price plans, which differ among service providers around the globe, and recently held a meeting with its gateway partners to discuss new marketing initiatives, said company spokeswoman Michelle Lyle. Details were not yet available last week, but Iridium is working on a more simplified global pricing approach, she said. Under a revised but not yet final plan, for example, international calls are $3.99 per minute for U.S. customers.
Iridium has had its share of problems since its launch last fall, and that could spell trouble for other satellite-based companies looking for capital. Even longtime Iridium believers said the satellite service market could be a bit too crowded. "There's a market for Iridium, plus one, but not three or four other competitors," said Andrew Cole, principal at the consulting firm Renaissance Worldwide.
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