Iridium S. Pacific Set To Meet Customer Targets - CEO
By BENJAMIN PEDLEY
Dow Jones Newswires
CANBERRA -- Iridium South Pacific Pty. Ltd., a franchise of Iridium LLC (IRID), is on track to meet customer targets set last October, and has sold satellite phones to the Australian Defense Force and local electricity utilities, said its chief executive officer, Carlton Jennings.
Jennings concedes Iridium has had difficulties since last November - when it became the first global satellite phone and paging company - because of poor marketing and slow rollout of phones by Kyocera Corp. (KYO or 6971).
But these snags have been overcome, particularly in the Asia-Pacific region, and all Iridium gateways are revising customer and revenue targets as part of a renegotiation of covenants related to US$800 million in secured loans, he said in an interview with Dow Jones Newswires.
Iridium South Pacific is one of 15 global gateways, or franchises, and is 50%-owned by an electronic communications unit of Indonesia's Bakrie & Brothers (P.BBR), with Japan's DDI Corp. (J.DDD or 9433) and Kyocera each having 25%.
These companies also have minority stakes in Iridium LLC.
Iridium LLC gained some financial breathing room late March, as it received a 60-day extension from its lenders on covenants related to the secured loans, after saying it would miss first-quarter targets for 52,000 total subscribers, US$4 million in cash, and US$30 million in accrued revenue.
Since the loan covenants were tied to those targets, Iridium would have been in technical default with its lenders had the extensions not been granted.
However, Jennings expects a successful renegotiation of the covenants, and a recovery in Iridium's share price when the company meets the new targets.
"We've asked each of the territories around the world to...essentially give a very realistic statement of where we are today, and where we expect to be at the end of the year."
While customer projections for Iridium will be lower than those included in covenants to banks last October, Jennings is committed to original forecasts for the South Pacific.
"The level of customers that I provided to the company in October, I haven't wavered from. I'll stick with that because I'm so positive about the service, and so positive about the customer care, and the distribution," he said.
"And we're right on the forecasts," said Jennings, but wouldn't specify what those projections are for the region.
When Iridium meets the new targets, Jennings said, the company will earn credibility.
"By giving the banks a realistic number, it might be less, but if you meet it you get credibility for that, and then the stock price comes up."
Iridium shares have fallen to near a 52-week low since it declared it would miss the customer targets, and suffered a further setback last week, when the company said Chief Financial Officer Roy T. Grant had resigned.
Grant, a key executive in the company's development stage, said he's leaving April 16 for personal reasons.
The share price of Iridium World Communications, the public investment vehicle for Iridium, ended Nasdaq trading Monday at 17 1/8, down from a high of 72 3/16 hit May 4 last year, and near a low of 14 3/8 reached Mar. 31 this year.
Secures Sales To Australian Companies
Consistent with his relatively upbeat assessment of Iridium's prospects in the South Pacific region, Jennings said the company has finalized contracts with the Australian Defense Force and local electricity utilities for initial orders of 30 or more satellite phone packages.
"Large Australian-based power companies have purchased phones, we've also had some purchases from the Australian Defense Force," said Chris Pearce, Iridium South Pacific's vice president, marketing and sales.
While unable to disclose the size of its contract with the Australian Defense Force, on the grounds of confidentiality, Jennings said a typical initial order by such large clients is in the order of 30 or more phone packages.
A satellite phone package sells for A$6,500-A$7,000, and the cellular handset alone retails for A$700.
Pearce said the maritime industry, the oil and gas exploration market, emergency services, aid agencies and transport companies, particularly trucking firms, have also expressed "strong interest" in the phone packages.
-By Benjamin Pedley; 612-6208-0901; ben.pedley@cor.dowjones.com
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