WSJ article about Iridium's (not too hot) performance in Kosovo.
April 27, 1999
Iridium Phones Fail to Win Accolades
As They Are Tested in Kosovo Crisis
By HUGH POPE and QUENTIN HARDY
Staff Reporters of THE WALL STREET JOURNAL
MORINI, Albania -- Norwegian television reporter Erik Stephansen is on the
remote mountain frontier of Kosovo with some cutting-edge personal
technology in his hand: the new Iridium satellite telephone. Luckily for him,
there is no breaking news: He has had to dial a number on his Iridium unit five
times. When he finally gets through, the connection drops after three minutes.
"I wanted to talk to my daughter. She's 12 now, so at least she understands
when it cuts off," says Mr. Stephansen, circling round and pushing the hefty
mobile phone's baton-shaped antenna up and down. He reconnects on the
second attempt.
Journalists and aid workers, among Iridium's prime potential
customers, have swarmed into Albania for the Kosovo
refugee crisis, providing an ideal test run for the highly
touted system. But the $2,300 Iridium phones, billed as
allowing subscribers "to communicate virtually anywhere in
the world," are proving to be less than ideal. Many users
report trouble making connections and complain, as Iridium
concedes, that the phones rarely work inside buildings.
Iridium LLC is backed by a consortium of global
telecommunications companies that spent about $4 billion to
make the ideal use-it-anywhere phone. With investors
including Kyocera Corp. of Japan and Motorola Inc.,
Iridium, based in Washington, launched 66 low-orbit
satellites and spent $180 million in advertising before the
system's launch on Nov. 1.
Iridium says any problems with its global satellite-communication system are
due to improper use by customers, marketing glitches and financial problems.
But the troubles in the field come at an awkward time for the company.
Monday, it reported lower-than-expected first quarter revenue, a
wider-than-expected loss and fewer-than-predicted subscribers. And just last
Thursday, chief executive Edward Staiano quit amid a plunging stock price.
Iridium said it risked technical default with its lenders until it won an extension
on covenants related to $800 million in secured loans.
The company, for its part, says the phone has performed well in the crisis. It
says it has offered aid agencies in Kosovo free use of the phone to allow ethnic
Albanians expelled by Yugoslavia to contact their relatives. In one week this
month, Iridium adds, 12,000 calls were successfully completed from the
region around Kosovo.
What about the commercial customers in Albania conspicuously fiddling with,
and cursing at, their hand-held units? "It sounds like they haven't had any
training," says Michelle Lyle, an Iridium spokeswoman. "If people don't use it
properly, it won't work."
The inability to use the phones indoors or in cities has been a serious
shortcoming in the field. Even amid crises, many satellite-phone users prefer to
make their calls from offices or hotel rooms, not standing outdoors. During a
recent downpour, Tina Hager, an American-born photographer, tried
unsuccessfully to place an Iridium call on the steps of a hotel in Kukes, a small
town 10 miles from the Morini border crossing. "Once you do get through, it's
addictive," she said. "But it isn't as good as I hoped."
Like other satellite phones, Iridium doesn't work inside buildings because of the
relatively weak signals to and from an orbiting satellite. Motorola didn't think
this would be a big problem when it first planned Iridium a dozen years ago,
because there were relatively few cellular-telephone users then.
To handle calls from cities, Iridium built a parallel circuitry inside the phone
that uses the increasingly common GSM mobile-phone standard. But that isn't
working in Albania. Albanian authorities switched off GSM roaming
agreements when their system was swamped by a sudden inrush of foreigners
toting ordinary mobile phones.
Frustrated users believe they are following instructions, and have many
theories about their Iridium problems. One theory holds (correctly, Iridium
says) that Albania's mountains may block signals. Many users think their calls
fail after a couple of minutes because they are dropped while a signal moves
from one satellite to another, but that's a rare occurrence, Iridium says.
The World Food Program, a United Nations agency that helps feed poor people
and refugees in more than 80 countries, has tested the Iridium unit in Africa
and East Europe and decided not to buy more. "The idea is beautiful. But it's
new technology. The product doesn't quite do what they wanted," says
Gianluca Bruni, one of the WFP's senior communications coordinators.
Inside the hotel restaurant in Kukes, aid workers, Western officials and media
people -- whom Iridium views as prime customers -- prefer phones using the
rival Mini-M technology developed for the Inmarsat system. Inmarsat, too, has
its limits. Subscribers use Norwegian-made Nera and Danish-made Thrane &
Thrane models, which are bulky, weighing five pounds and shaped like laptop
computers.
Made by a London-based consortium called the International Maritime Satellite
organization, the Inmarsat phones run about $1,700. The Iridium phone's
typical $2,300 cost can run much higher in countries that have high import
duties.
The Kosovo crisis is bringing congestion on the Inmarsat satellites, though it
rarely lasts more than half a minute. But the Inmarsat models are proving to be
relatively reliable workhorses, robust and easy to point at their two stationary
satellites over the Atlantic and Indian Oceans. Their flat antennas lift off and sit
on an inside window ledge, enabling users to make calls or link their computers
indoors.
The World Food Program uses Inmarsat mini-M phones for satellite calls
placed by its officers. In the long term, Mr. Bruni says, heavy users may move
away from commercial satellites. The WFP, for instance, has pioneered a way
to bypass satellite calls as much as possible, due to the call rate of about $2.70
per minute. Internet mail is now the WFP's first means of communication,
done through local phone systems; even countries like Albania now have good
Internet access. The group uses handheld radios for local voice calls. For
remoter stations dealing with refugees, a new radio system links computers in
the field with base in the capital, Tirana.
"It works," says Mr. Bruni. "Our theory is that you don't need long-haul
communications. On Day One of an emergency, yes, the satphones are used,
but that's pretty much it. The satphones are now last in the line."
Back in Washington, meanwhile, Iridium has its hands full with searching for a
chief executive, a new chief financial officer and a head of marketing. The
company said arguments within the Iridium board room were behind Mr.
Staiano's departure. Analysts said the disagreements related to distribution and
marketing arrangements. Iridium is also facing a late-May deadline for
renegotiating its bank loans, which came in technical violation after the
company failed to deliver promised first-quarter subscriber numbers.
And Iridium Monday said that it had a net loss of $505.4 million, or $3.45 a
share, compared with a net loss of $203.6 million, or $1.45 a share, a year
earlier. Analysts polled by First Call were looking for a per-share estimate of
$3.17. Iridium had revenue of $1.45 million in the recent quarter, and none a
year earlier because it hadn't begun operating the system commercially.
Partner Motorola has already put several hundred salespeople on direct sales of
Iridium phones, and Iridium itself plans to better tailor the product prices and
service for specific markets, such as oil-rig workers, aid agencies, or
governments. There are also plans for speedier training aids, such as inserting
a laminated card on the phone that gives usage instructions and technical
shortcuts.
And Iridium thinks its answer is more and better training, both of its own
salespeople and its customers, to avoid improper use or false expectations.
Says Leo Mondale, senior vice president of strategic planning at Iridium,
"We've identified dramatically higher customer satisfaction among users who
were properly informed of the capabilities and limitations of the satellite service
and trained in its use, versus those who opened the box and turned on the
unit."
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