WorldSpace Satellite Radio: Fading Signals?

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Case Details:

Case Code : BSTR239
Case Length : 22 Pages
Period : 1990-2006
Organization : WorldSpace Corporation
Pub Date : 2006
Teaching Note : Available
Countries : The US, India, Africa
Industry : Media and Entertainment

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

Noah Samara (Samara), the founder of WorldSpace⁵, was born in Ethiopia, and later migrated to the US for higher education. He founded WorldSpace in 1990 in Washington DC, to provide satellite radio services to the African continent and other third world countries.

In Samara's view, there was a distinct need for information in these developing countries, but many of them lacked the infrastructure to receive and disseminate such information. The stated objective of WorldSpace was to provide news, education, and entertainment along with other useful information to the developing regions of the world (Refer to Exhibit II for a note on satellite radio).

In the early 1990s, Samara participated in the 'World Administrative Radio Frequency Conference'⁶ held in Torremolinos in Spain, which diplomats from 127 countries attended. To provide digital audio broadcasting, Samara required 25MHz of the L-band⁷, which was a slice of the 1000MHz electromagnetic spectrum. This spectrum range was used by countries for communication purposes.

After several rounds of negotiations, the International Telecommunication Union⁸ agreed to grant Samara the required range in the L-band. Samara also received the US government's approval for the first US Federal Communications Commission (FCC)⁹ satellite radio license.¹⁰ The initial investment of $1.1 billion¹¹ in WorldSpace was made by two Saudi Arabian businessmen, Khalid bin Mahfouz and Mohammad Hussein Al-Amoudi (Al-Amoudi). Together they held an 80% stake in the company. Another businessman, Saleh Idris bought a 6% stake. Alcatel Space, a subsidiary of Alcatel Corporation¹² of France, built the geo-stationary satellites¹³, which were to broadcast WorldSpace signals around the world.

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5] He was also the Chairman and CEO of the company as of 2006.

6] The World Administrative Radio Conference, held once every two years, is part of the International Telecommunications Union-Radio Communications standardization sector.

7] The L-Band is a part of the electro-magnetic wave ranging from 0.39 to 1.55 GHz. It is used in satellite and terrestrial communications.

8] The International Telecommunications Union, headquartered in Geneva, Switzerland is an international organization within the scope of the United Nations system. It is a union in which governments and the private sector come together on issues relating to global telecom networks.

9] The Federal Communications Commission is an US government agency that regulates interstate and international communications by radio, television, wire, cable, and satellite.

10] Nathan Vardi, "Bird in the Hand," Forbes, April 29, 2002.

11] Dollars ($) refers to US dollars in this case study.

12] Alcatel Corporation, headquartered in Paris, France, is a worldwide telecommunications equipment and service provider with revenues of $17.5 billion in 2006. Alcatel Space was renamed Alcatel Alenia Space in 2004.

13] Geo-stationary satellites are satellites that are launched into geo-stationary orbits. A geostationary orbit is a circular orbit which is directly above the Equator and revolves in the same direction as the earth and with the same orbital period as the earth's period of rotation. Consequently, satellites in the geostationary orbit appear to be stationary with respect to a fixed point on earth.