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Iridium to Relaunch Satellite-Based Mobile Phone Service With New Focus

March 28, 2001|BRUCE MEYERSON | ASSOCIATED PRESS

NEW YORK — Fresh from its $5-billion bankruptcy and near-destruction in the Earth's atmosphere, Iridium plans to relaunch its satellite-based mobile phone service this week.

The new owners of the 66-satellite network, Iridium Satellite, planned to announce today that the system will go live again Friday, almost exactly a year after commercial service was turned off.

Iridium Satellite paid just $25 million to acquire the system, which cost Motorola and other investors more than $5 billion to develop. Service was launched in late 1998 and it slid into bankruptcy by the following summer, drowning in debt.

The new venture insists the key to success will be its new focus on remote work settings such as oil rigs and cargo ships, not the business travelers and consumers the old Iridium tried to lure. Another distinction will be the launch of wireless data services in June.

It certainly won't hurt, however, to start without a crushing, multibillion-dollar debt load to shoulder, a burden that now threatens to sink satellite phone rival Globalstar.

Pressured by anxious investors, both Globalstar and the old Iridium lacked the luxury of time needed to pioneer a brand new market.

"Inheriting a $5-billion system for $25 million is a very good place to start," said Jose del Rosario, an industry analyst at Frost & Sullivan. "You don't have to recoup such a huge investment in such a short period of time. I don't think they're planning to sell stock and enter the public financial markets any time soon, so all pressures will be internal for the time being."

In the end, the old Iridium peaked with 55,000 customers, but probably scared away hundreds of thousands of potential users with sticker-shock calling rates of $7 per minute and mobile handsets costing up to $3,500.

Globalstar started with much cheaper calling rates and handsets when it launched service in North America about a year ago, but the company still found itself halting debt payments at the start of 2001 to ensure it would have enough cash to survive the year.

The new Iridium expects that the wireless carriers it has partnered with will charge about $1.50 per minute for calls. Exact details, including any monthly charges, weren't immediately available.

By contrast, Globalstar recently lowered its rates to $1.49 a minute for entry-level subscribers to as low as 89 cents per minute for high-volume users.

Naturally, Iridium will try to woo its old customer base back, but the focus will be on more specialized uses such as the $72-million contract signed with the Department of Defense.

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