Sunday, May 04, 2008

Iridium on the up-and-up as sales grow by 41 per cent

Iridium Satellite, that phoenix from the ashes, has posted a 41 per cent increase in Q1 revenue to US$74.3 million. The satellite operator says subscriber numbers grew by 37 per cent year-on-year to reach 250,000 in the three months through to the end of March as voice and data traffic, simply rocketed. North American services doubled and traffic in the Asia Pacific region shot up by 61 per cent. On the revenues front, EBITDA income surged by 80 per cent to $24.4 million.

It is a remarkable turnaround for a company that only a few years ago was generally regarded as a hopeless basket case. Iridium first went into service on November 1, 1998 and went into Chapter 11 bankruptcy protection just nine months later, in August, 1999. Iridium's original business case was predicated on the availability of global wireless communications being provided via a constellation of 66 satellites in low earth orbit that would allow phone calls to be made to and from (literally) anywhere on the planet, including the high seas, deserts and tundra and even the North and South Poles. i.e. areas almost entirely devoid of humans. Whilst iridium struggled to solve a myriad of technical problems and combat some very bad press, global roaming on terrestrial GSM handsets took off and left Iridium without a reason for existence.It failed financially because there was insufficient demand for the service, coupled with a massive initial capital cost running into the billions of dollars.

When Iridium went into Chapter 11 protection, it had a knock-on effect on other planned commercial satellite constellation projects and was the kiss of death for the likes of Teledesic. Other schemes, including Orbcomm, ICO Global Communications, and Globalstar followed Iridium into bankruptcy protection, while a number of other initiatives got no further than the drawing board.At that time it was expected that the Iridium constellation would have to be de-orbited but whilst the debate on how when and where to bring the whole scheme literally down-to-earth was at its height, the service was restarted in 2001 by the newly founded Iridium Satellite LLC, now owned by a group of private investors. For them it was the bargain of the new millennium. Iridium cost the original investors somewhere in the region of $6 billion, while the new boys bought it at the incredible fire sale price just US$25 million.

The system is now being used extensively by the US Department of Defense (DoD) through its gateway in Hawaii. Meanwhile , spooks apart, there is also a commercial gateway in Tempe, Arizona, that provides voice, data and paging services for commercial customers on a global basis. Iridium customers include maritime, aviation, government, the oil, petroleum and gas industries, scientists, and some well-heeled frequent world travelers. And now the revived Iridium is beginning to make good money. Indeed, calls to Iridium phones remain notoriously expensive, with charges ranging from $2 to S$14 per minute.

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