** WashPost. Iridium Delays Start of Global Network
By Mike Mills Washington Post Staff Writer Thursday, September 10, 1998; Page C03
Iridium LLC announced yesterday that it is delaying the launch of its global wireless satellite telephone and data service until at least Nov. 1 from the initial Sept. 23 date, as the company works out technical and marketing kinks.
"We have come too far and have invested too much time, money and effort in this business to go into commercial service with anything less than a world-class product," said Edward Staiano, chief executive of District-based Iridium.
Rather than begin selling service commercially, Iridium on Sept. 23 will deliver telephone handsets to 2,000 individual, corporate and government customers on a free trial basis.
Analysts generally expected the delay. The announcement had little affect on Iridium shares, which closed yesterday at $34.50, up 12 1/2 cents a share in trading on the Nasdaq Stock Market.
"The delay announcement is no big deal and not a big surprise," said Ann Henry, an analyst for BancBoston Robertson Stephens Inc. in New York. Iridium had hinted at such a delay in a July conference call to analysts, she said.
Iridium is the most ambitious telecommunications satellite network to date, with 17 launches sending 79 satellites into orbit. The system requires 66 satellites to operate and uses several as spares. Iridium has lost five satellites as a result of in-orbit malfunctions.
"We're one month beyond where we had said we were going to be" after 11 years of planning, constructing and launching the 66-satellite network, Staiano added. "I don't think that's too bad for a program of this magnitude."
The basic elements of the Iridium network are working properly, Staiano said. The satellites can communicate with one another and with 12 earth-station "gateways" connecting users to the system. The software that runs the system is in place, and only a few bugs remain.
But analysts said they had anticipated better progress in the rate of calls completed on the system. In July Staiano had said 70 percent of calls would go through; yesterday he pegged the call-completion rate in the "high 70 percent" range.
"We've made tens of thousands of test calls, and we'll make more in next two weeks," he said. "But it is not enough. We need to make hundreds of thousands of calls."
Iridium's biggest challenge, Staiano said, has been to coordinate operations among its network of 66 satellites, its ground control center near Leesburg and its gateways in locations around the world. A thunderstorm in Phoenix, or an unexpected power surge in India, for example, have sent the system into turmoil, he said.
"We've had a lot of cockpit problems in the operations and control area. We're not yet in a fully stable state," Staiano said. "This has been extremely demanding on all of our operational folks. It's a lot different actually driving a car than reading a book about driving a car."
Marketing and sales operations also have remaining glitches, he said. "We are not satisfied yet with our ability to respond to customers and are working very hard to improve that activity," he said, adding that Iridium has about 40,000 sales leads.
The service also has been disrupted by the most mundane nontechnical details. Iridium phones in some countries got waylaid at various customs offices, for example, as border guards investigated whether the devices should be allowed in.
The global financial crisis, particularly in Russia and Asia, would not adversely affect Iridium's business, Staiano predicted. To the contrary, he said, a slowdown in construction of land-based cellular systems would only enhance the need for Iridium phones, he speculated. [This is a positive for GSTRF as well.]
Motorola Inc., which is manufacturing the phones for use with Iridium's system, plans to charge $2,795 for its phone in the United States, with in-country phone rates starting at $1.79 a minute. The company plans to ship 100,000 phones to retailers worldwide by year's end.
Kyocera Corp., which also is making Iridium phones, is a month behind in delivering its handsets and has some bugs to work out, Staiano said. He added, however, that Kyocera phones should be available by the November commercial service date.
Iridium has licenses to serve 100 countries, representing three-fourths of its business plan, Staiano said. It also has agreements with 85 public telephone companies to allow Iridium users to call and receive calls from those countries. But Iridium still lacks operating licenses in several targeted countries, including France, Saudi Arabia, South Africa and Belarus.
c Copyright 1998 The Washington Post Company
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